You recently said that storage is the ‘weakest link’ in Europe’s electricity chain today. Could you explain why that is?

Our electricity chain, or indeed our whole energy chain, is integrated in a very complex way. Everybody treats it as if it were the sum of individual silos and nobody tries to build intelligent bridges or links between them. Storage could be a fantastic bridge, making sure we get higher efficiency at lower cost. It has huge potential. Having said this, we should never forget that storage – by definition – has negative efficiency and excessive costs. You don’t want to store for the sake of storing. You only want to store if the alternative solution is even more expensive – for example expanding the grid. That holds both for large-scale and small-scale or local storage.

Why is storage important for the future development of the electricity grid?

We will see growth in the electricity demand up to 2050 – and the share of renewables will grow disproportionately. Also, the greatest growth will be in variable renewables. As the share of variable renewables grows, the need for storage will be zero at first, then minor and finally the need will grow exponentially. The situation will be very different in 2050 to what it is now, although it will vary from country to country. For example, we expect there to be major problems in Germany by 2030, due to the Energiewende - the Federal energy transition strategy. They are aiming for a high proportion of renewables in a very short time – anywhere between 85 % and 95 % before 2050, depending on how you calculate it. Other countries are aiming for 45 % – 65 %.

What role can small-scale, decentralised storage play in managing the grid?

For the moment we have a huge growth for local solar photovoltaic (PV) generation. A small part of what is produced is used in the home and the remainder is dumped into the electricity grid, as if it were a waste bin. Very few people ask if the grid can take it or if the grid needs it. Some people believe that everything can be solved with smart grids, smart meters and demand side management. A lot can be solved with those solutions. But at a certain moment, which is highly dependent on local circumstances, storage could be a cheaper or more efficient solution. However, there cannot be a ‘one size fits all’ rule for all of Europe.

The most foolish thing to do is store PV electricity in batteries and then use the batteries to heat domestic hot water. It’s also stupid to use local batteries to drive air conditioning. We have to integrate the storage of electricity with the storage of heating and cooling. It is a hundred times cheaper to store heat or cold than to store electricity. It always makes most sense to store what is cheapest. We need to get rid of the politics and first make sure that the thermodynamics are right.

Regarding grid management, a huge amount of electricity is already used for heating homes and domestic hot water. The installed capacity in Europe is about 50 GW, which is exactly the same as the installed capacity of pumped hydro storage plants. Tapping those for free would make a huge amount of sense – and that is especially true in the UK, Ireland and France. That’s why we should be talking about energy storage and not just electricity storage. It’s an important distinction.

How does the notion of a smart grid affect the way storage will be used?

The smart grid allows us to manage all the different elements in a more intelligent way. If you have a smart grid you want to have smart storage too. Or you can have ‘stupid storage’, but manage it in a smart way. An electric domestic hot water storage boiler is stupid. But if you link it in a smart way into the energy system, then the system becomes smart.

Is the technology in place for the widespread use of decentralised storage?

For the moment a large share of electricity is used for heating hot water and space. And we are moving towards greater use of heat pumps that are electrically driven. Germany has started to promote battery storage, with mixed results. They’ve only spent one quarter of the subsidies that were foreseen for 2013. People were reluctant to buy. The payback is too long. At a recent conference I asked a simple question: if you have 1000 batteries and 1000 homes, do you put one battery in each home, or 1000 batteries in one place, close to the transformer station? Everybody agreed that the transformer station solution was better. This was true for government subsidies, Distribution System Operators (DSOs) and battery manufacturers. They all prefer the idea of batteries close to the power station. This however is the case for Germany – other locations may have different rules and regulations.

We know that in ten years we will have much more storage, but we don’t know which type, which technology, or how to optimise the storage technologies in terms of performance and costs. We will have to learn by doing.

What more needs to be done in terms of policy and regulatory frameworks to encourage the private sector to help bring costs (of storage) down?

We are working very hard on that because batteries are not electricity generators – they have negative efficiencies. They are a tool to increase flexibility. But nobody rewards flexibility at the moment. As long as you are only buying and selling kilowatt-hours while you need flexibility, the market can never be right. We have to change the market rules. If you use batteries to stabilise the voltage of the grid or the frequency, for example, you won’t be paid for that service. How do you expect the benefit to be right if the market conditions are wrong?

At the moment we are still trying to develop this kind of policy. We’re in a phase I call ‘n+1’, where ‘n’ is the number of people discussing and ‘n+1’ is the number of opinions. The market has been wrong for the past 40 years. So it’s not a question of gaining two weeks of time and making mistakes. It’s not important if it takes six months or two years to get it right. What matters is to get it right, to give the right signal to industry so that they go for large-scale implementation.

Most hydropower storage facilities are located near to national borders, because transporting electricity 20 km is easy. But the problem is that we have different and conflicting regulations in different countries. In Europe, you are allowed to sell kilowatt-hours on the wholesale market, but you are not allowed to sell dynamic storage services and other grid interventions across national borders. At the end of our strategy paper in DG-ENER you will see a table with all the different regulations. No two countries are the same. And every country’s storage is regulated differently. This makes it doubly complex. Storage is very complex.

Do you think we need to change these regulations?

If we don’t change the regulations we will stop the existing storage facilities, just when we need more. To save the market for local storage we also need to adapt local regulations to get local storage. If we don't do that we will fail in our objectives for 2030-2050. It’s quite simple. No experts believe we can achieve 2050 targets with zero storage. Ten to fifteen years ago people believed that, but not today. There is an official statement from the German government that says: ‘no storage, no Energiewende'. They’re very firm about that and the French think the same: and that holds for the batteries in an iPhone, or an electric car, as well as pumped hydro storage.

How can SETIS help to encourage these developments?

SETIS is absolutely necessary to ensure that we get the strategy and technology right, in a neutral and professional way, free from lobbying, industrial interests, national policy, etc. The subject is very important and I am so pleased that my colleagues working in SETIS take this task so seriously. Over the last two years we have succeeded in having a very dynamic dialogue with all industrial stakeholders. We hope that this positive cooperation will continue over the coming years, also with SETIS.