In keeping with the most recent evaluation from our colleagues at Photo voltaic Media Market Analysis, operational capability within the UK is predicted to achieve 7.3GW and 11.6GWh by the top of 2024. Whereas its European pals and neighbours are beginning to speed up their efforts, it stays possible the UK market will stay on a powerful trajectory, as Photo voltaic Media analyst Mollie McCorkindale instructed us not too long ago.
Nonetheless, it should possible not have escaped your consideration that amid this buildout, battery storage revenues within the UK – or extra particularly within the elements of the UK that comprise the Nice Britain (GB) grid of England, Scotland and Wales – are in one thing of a lull.
In October final yr, Power-Storage.information heard from trade sources that whereas some saturation of the ancillary companies markets that had because the market opened in 2016 comprised the majority of exercise and revenues for battery vitality storage system (BESS) belongings was anticipated to chunk in 2023, the ensuing drop in revenues had been sharper than most had anticipated.
That is largely considered as a result of because the ancillary companies revenues for functions similar to frequency regulation dropped, vitality buying and selling and arbitrage had been anticipated to select up the slack, which for numerous causes, has not fairly materialised as healthily as many would have favored.
A story of three listed funds
We at the moment are within the thick of quarterly outcomes and monetary updates season for Q1 2024 for many listed corporations, which provides the trade a precious barometer of the place the market has been heading and what these corporations anticipate to see within the yr forward.
The London Inventory Alternate (LSE) has three pure-play vitality storage funds listed on it: Gresham Home Power Storage Fund, Concord Power Revenue Belief, and Gore Road Power Storage Fund.
Gresham Home supplied a buying and selling replace forward of its full-year 2023 outcomes launch in April, lined by this web site on 1 February. The fund stated its belongings had been uncovered to the UK market’s “weak income setting”. Whereas its pipeline buildout will progress this yr, taking it from 740MW to 1,072MW, it instructed buyers to not anticipate any recent venture bulletins throughout 2024.
Only a day later, 2 February, Power-Storage.information reported that Concord Power Revenue Belief too had introduced considerably decrease revenues in 2023 versus the earlier yr. Once more, this got here as a part of an replace, reasonably than a full outcomes launch, which is predicted later this month.
Lastly, Gore Road Power Storage Fund echoed the identical types of considerations a number of days in the past concerning the UK market. Gore Road, which has diversified into Texas’ ERCOT, California’s CAISO and the grid-connected BESS markets of Germany and Eire, stated that its worldwide portfolio was the principle driver of its “steady income and revenue profile” meaning it might be able to pay a dividend to shareholders the place Gresham Home could not.
Briefly, as defined by Gresham Home, BESS belongings may have an enormous position to play within the balancing of the GB grid through, appropriately sufficient, the Balancing Mechanism run by system operator Nationwide Grid ESO.
Nonetheless, attributable to excessive skip charges – batteries being neglected in favour of legacy era belongings, largely pure gasoline – the Balancing Mechanism (BM) participation of BESS belongings stays a lot decrease than it may, and may, be.
‘UK has alternatives to earn revenues all year long’
On the Power Storage Summit EU which can be hosted by our writer Photo voltaic Media in London later this month, it’s possible the present UK setting for BESS revenues and the challenges related can be main speaking factors. Or maybe for some, it is likely to be the elephant within the room to keep away from. Both manner, it’s the fact.
Does that actually matter? In fact, it does within the brief and maybe medium time period. It makes all the things trickier, particularly given the macroeconomic situations of excessive inflation and costly borrowing across the market.
It could actually not be truthful or apt to trivialise that. Nonetheless, within the grand scheme of issues, the GB grid’s elementary path is in the direction of greater penetration of renewable vitality and better electrical energy demand based mostly on rising electrification of transport, buildings, and warmth.
Which means the elemental drivers for vitality storage will stay and amplify. Nationwide Grid ESO for its half is making adjustments to accommodate that want.
Our webinar with battery storage optimiser and dealer GridBeyond final month, ‘Do greater dangers imply greater returns for battery storage buyers,’ the dialog between panelists Scott Berrie from GridBeyond, Zenobe Power head of economic merchandise Charles Pearce and Fig Energy CEO Henry Easterbrook inevitably turned to this subject.
You may watch the webinar in full right here through our YouTube channel, or you possibly can register on-demand to additionally obtain Scott’s presentation supplies.
Taking the instance of ERCOT in Texas, the place some belongings had made revenues equal to a number of months if not years of forecasted returns in a matter of days because the unregulated market struggled to deal with excessive climate situations, I requested the assembled panelists what they believed constituted cheap or practical income expectations for BESS.
“Texas might be the acute instance however I feel it supplies a little bit of an analogue for the longer-term returns on the battery asset, and clearly once we’re forecasting these we forecast these in a pleasant easy kind of long-term pattern,” Zenobe’s Pearce stated.
“However in actuality, you’ll most likely begin will see extra volatility on these costs over the long run, which can common out to that to justify the enterprise funding, hopefully.”
The UK in the meanwhile is “most likely seeing a low interval of returns,” however Zenobe expects to see the spikes in volatility all through the course of an funding that justifies the enterprise case, Pearce stated.
And whereas belongings in ERCOT may even see these occasional income jumps that imply large surprising windfalls, GridBeyond’s Scott Berrie stated that participation in ERCOT can also be taxing for BESS belongings in that availability to answer these market spikes and indicators is important.
“Availability may be very, very key in that [ERCOT] market, that your asset is out there to make that cash in any other case you’re going to have a really dangerous yr,” Berrie stated.
“The advantage of the UK market is as a result of it’s matured, there’s really alternative all through everything of the yr.”
Fig Energy’s Henry Easterbrook in the meantime stated that the early days of the UK’s ancillary companies boom-driven market could possibly be analogous to ERCOT, the dynamics at the moment are fairly totally different.
The market is skewed attributable to its continued reliance on pure gasoline to steadiness the system, which Easterbrook stated: “received’t be the identical going ahead”.
“Simply the supply of an ageing gasoline fleet and the business problem of constructing something new which goes to preclude something actually approaching [to add to that fleet] means there’s going to be a very totally different dynamic,” Easterbrook stated.
“Batteries will present among the companies that, traditionally have been… narrowing spreads which have been closed by gasoline, can be a possibility for batteries that we haven’t seen but.”
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