Connection and operation of Energy Storage Systems (ESS) within the internal electrical grids of an active consumer

Source: Yurydychna Gazeta (Legal Newspaper)

In the current landscape of frequent power outages, the utilization of Energy Storage Systems (ESS) has emerged as a vital mechanism. This technology—particularly when integrated with a generating unit—enables businesses and households to achieve energy autonomy, satisfy internal demand, reduce consumption costs, and monetize surplus electricity.

This article examines the regulatory framework for Active Consumers regarding the connection of Energy Storage Systems, the technical requirements for their integration, and the optimal operational models for self-consumption and the sale of surplus power.

The Right of an Active Consumer to Connect Energy Storage Systems

Article 58-1 of the Law of Ukraine “On the Electricity Market” (the “Law”) and Chapter 11.5 of the Retail Market Rules (the “Rules”), approved by the National Energy and Utilities Regulatory Commission (NEURC), establish the right of an Active Consumer to connect Energy Storage Systems (ESS) within their internal technological power networks.

Under the Law, an Active Consumer is defined as a consumer (including private households, energy cooperatives, and energy service clients) that consumes electricity while simultaneously producing it, performing energy storage activities, or selling surplus generated or stored electricity, provided these activities are not their primary business or professional occupation.

Status as an Active Consumer is acquired upon:

• Executing a Self-Generation Purchase and Sale Agreement (as an addendum to the standard supply contract);
• Executing a contract with the Guaranteed Buyer or a Universal Service Provider (USP) for sales under the “Green Tariff” (Feed-in Tariff);
• Installing an ESS to participate in the ancillary services market, balancing market, or organized market segments, either independently or within aggregated groups.

Licensing Requirements for ESS Operations

Pursuant to Article 58-1(5) of the Law, an Active Consumer is entitled to operate an ESS without a license, provided the installed capacity does not exceed the contracted (permitted) capacity of the consumer’s electrical installations.

Furthermore, Article 58-1(9) specifies that energy storage by Active Consumers is deemed “storage for own needs” and is exempt from licensing requirements, provided the total installed ESS capacity at a single metering point does not exceed 5 MW.

Operational Models for Active Consumers

Active Consumers may configure their operations based on specific strategic objectives:

1. Arbitrage and Peak Shaving: Installing an ESS to charge from the grid during off-peak hours (low tariff) and discharging during peak hours to reduce expenditure.
2. Hybrid Generation & Storage: Combining a Generating Unit (GU) with an ESS. The ESS is charged via onsite generation; stored energy is then used for self-consumption or sold during peak hours at higher prices.
3. Market Participation: Utilizing ESS to provide ancillary or balancing services. Currently, this option lacks simplified procedures and requires full compliance with market participant registration, certification of the ESS, and provider status acquisition.

Grid Injection Restrictions

According to the Retail Market Rules and the Distribution System Code (DSC), the capacity permitted for injection into the grid under the self-generation mechanism (excluding residential and small non-residential consumers) cannot exceed 50% of the consumer’s permitted (contracted) capacity.

Example: If a consumer has a contracted capacity of 200 kW, surplus sales are capped at 100 kW per hour.

However, a legal ambiguity exists regarding capacity increases. While the Law suggests that meeting specific technical requirements of the Distribution System Operator (DSO) should suffice to increase injection limits, the DSC stipulates that such an increase requires a formal connection service procedure.

Notably, ESS capacity not operating under the self-generation mechanism is not subject to the 50% restriction and may be utilized up to 100% of the contracted capacity.

Connection Procedures for Internal Networks

The integration of an ESS into the internal networks of an Active Consumer follows Section 4.13 of the DSC. Key procedural features include:

• No Connection Fee: Since the ESS is connected to internal networks, the DSO does not provide a connection service, and no fees are payable.
• Technical Compliance: Consumers must ensure inverter settings comply with state standards, including automatic disconnection during grid failure and the prevention of poor-quality energy injection.
• Commercial Metering: Separate metering must be established to record the intake and output of energy to and from the ESS.
• Notification: The consumer must provide written notice to the DSO (Appendix 12 of the DSC) including a single-line diagram. The DSO then conducts a technical verification and seals the protective equipment.

Tariff Settlements for Active Consumers with ESS

Article 58-1(10) of the Law mandates that Active Consumers with ESS pay transmission and distribution tariffs calculated separately:

1. On the volume of electricity consumed from the grid for standard installations.
2. On the absolute value of the difference between the monthly intake and monthly output of the ESS.

Because ESS operations are metered separately, the consumer is only billed for the net monthly difference of the storage unit’s grid interaction.

The implementation of Energy Storage Systems within the networks of Active Consumers represents a transformative shift in the energy market. It enhances both energy and economic resilience. While the existing legal framework provides a solid foundation for ESS deployment up to 5 MW, further legislative refinement is required to simplify capacity increases and facilitate broader market participation for decentralized actors.

Svitlana Kamienieva, Counsel at Altelaw & Sempra: