The table below identifies a range of ownership types and some of their features and risks. Typically, although not always, the battery owner will manage and make decisions about the battery. Thus governance goes hand-in-hand with ownership. At this early stage of the technology, diversity and experimentation are critical, together with environmental and social benchmarks and high standards of transparency and accountability. Like any new technology, there remains a risk that incumbent organisations who are better resourced to implement more quickly may dominate the landscape and eventually restrict access to other groups.
| Ownership type | Features and Options | Risks |
|---|---|---|
| DNSP in partnership with government e.g. local council | DNSP can control battery operation for network services, Council can provide finance, accountability and engagement | Lack of access to energy markets affects feasibility and benefit sharing |
| Community organisation with market participant | Battery can participate in energy markets, benefits controlled by the community. | Complex to set up and stack up financially |
| Third party (community fund/bank/council) with market participant | Battery can participate in energy markets, third party can provide financial backing and may provide engagement channels | Complex partnerships and governance arrangements, may be limited community involvement. |
| DNSP | Passive infrastructure (no community participation), no participation in energy markets | Limited community benefit Risk of gold plating the network |
| DNSP with market participant | Battery can participate in energy markets. Benefits to network and retailer may be passed on to customers | Businesses take disproportionate share of profits from community solar |
| Community organisation | Can be for-profit but usually not-for-profit | If community benefits prioritised (e.g. decarbonisation and disaster resilience) there may be insufficient revenue to cover costs |
| Market participant e.g. generator, retailer, aggregator | Benefits to market participant may be passed on to customers | Businesses take disproportionate share of profits from community solar Complexity around retail products |
| Greenfield developers with market participant | Battery can increase renewable capacity of new green suburbs, potential to reduce network investment required | Benefits may not be passed on to community |
Community ownership is generally regarded as difficult, given the range of challenges that exist for a new technology project, and the relative lack of financial resources available to community groups. Despite this, several not-for-profit community groups have been the first third parties to successfully launch neighbourhood batteries, with government support.
In other parts of the world, community energy initiatives, generally supported by government, have contributed to the decarbonisation of energy systems (e.g. Community Energy Scotland) and may have helped to build social acceptance of energy technologies, such as wind turbines. So, while community ownership models should not be adopted lightly – there is considerable effort and risk involved – they certainly seem worth considering, particularly if the social values and services potentially delivered by a neighbourhood battery are taken into account.
There are some advantages for not-for-profit groups. They can avoid certain requirements under the NEM rules, such as those faced by DNSPs, who are restricted to using a battery for network services and cannot participate in energy markets. Small, not-for-profit groups are also not required to comply with full financial services licensing requirements, that businesses such as retailers face.
Note that ‘community ownership’ can be quite diverse and can involve various kinds of community groups and organisations and different financial arrangements, such as direct investing, an investment fund, government sponsorship or partnerships with local businesses. In addition, there are community-based, not-for-profit energy businesses that could partner with communities to deliver neighbourhood battery projects.
DNSP ownership of batteries is impacted by ring-fencing rules (NER 6.17) which limit DNSPs to only using the battery for (regulated) network support services. The rule outlines how services that can be provided on a competitive basis must be legally and functionally separated from the regulated network services that a DNSP provides. Ringfencing is in place to prevent networks from exploiting their natural monopoly power i.e. to maintain market contestability.
DNSPs can apply for waivers of some clauses in the ring-fencing guideline. As such, there are no absolute restrictions preventing a DNSP from owning a neighbourhood battery and leasing part of that battery to a third party for contestable services. Procuring non-network services from third-party operators of storage devices is already allowed.
Retailer or generator ownership of neighbourhood batteries can provide generation capacity and retailers are positioned to access energy markets and facilitate customer participation. Retailers can also, in theory, use neighbourhood batteries to provide ‘non-network’ solutions to DNSPs and be paid for this. In practice, neighbourhood batteries are too small and as yet likely too expensive to be of great interest to large energy companies, especially given current challenges around being paid for network services. Small, local, green retailers may be interested in owning neighbourhood batteries, both to gain renewable generation capacity that can buffer against wholesale market fluctuations and to build their green, community offerings.
To learn more, see Evidence on different ownership models.