Gresham House Energy Storage Fund (GRID) says the decommissioning of the final coal plant in the UK has benefitted battery energy storage system (BESS) revenues.
The UK’s largest fund investing in utility-scale BESS has published its quarterly business report, showing that GRID’s portfolio generated revenues of £11.7 million in Q3 2024 as portfolio revenue rates improved to £59k/MW/yr compared with £49k/MW/yr in the first half of the year.
Although its revenues were bolstered by the fund’s increased operational capacity, reaching 790MW at the end of September this year, October revenues benefitted from reduced excess supply as the final coal powered generation came offline in the UK.
Previously, coal generation created “significant” excess supply during winter. Without it, scarcity pricing is beginning to return on days of low renewable generation, highlighted by the first Capacity Market notice to be issued in almost two years on 14 October this year.
The notice was cancelled once additional generation came online—this is more expensive than BESS and reflects high skip rates prevalent in the UK’s energy system—but still led to higher peak electricity prices.
GRID states that merchant revenues are likely to remain volatile while NESO improves the Balancing Mechanism. It is “encouraging” to see supply volatility begin to translate to volatility in system prices and, as a result, improved trading spreads.
The portfolio is outperforming market analytics firm Modo Energy’s BESS index to achieve an average of 26% higher revenue, with October being the best individual month of the year so far for GRID’s portfolio.
According to Ben Guest, fund manager of Gresham House Energy Storage Fund & managing director of Gresham House New Energy, the company is set to have nearly doubled the operational capacity of its portfolio by the end of 2024, giving the firm “a much stronger footing” for earnings generation.
Guest added: “It is pleasing to see that while revenues in GB are improving across the market, we are maintaining our outperformance versus the competition whilst delivering a more diversified GB revenue profile.
“This underlying revenue performance, combined with the increased operational capacity under management, means that the company remains on track to outperform 2023 revenues this year.”
Coal plant closure and an end to new licenses
After the 2GW Ratcliffe-on-Soar power station, owned by German energy company Uniper, was officially decommissioned on 30 September, the UK became the first G7 nation to go completely coal-free.
On 14 November, a written ministerial statement was published by the government stating that it will introduce legislation to restrict the future licensing of new coal mines “as soon as possible”. Energy minister Michael Shanks said: “By consigning coal power to the past, we can pave the way for a clean, secure energy system that will protect billpayers and create a new generation of skilled workers.”
Jess Ralston, head of energy at the Energy and Climate Intelligence Unit (ECIU), called the move the example that the rest of the world can follow”.
