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Battery storage is 'standing on its own two feet' as investor confidence rises

Gresham House's 50MW Wickham battery storage site. Image: Gresham House

Gresham House's 50MW Wickham battery storage site. Image: Gresham House

Investors are now becoming more comfortable with battery storage, with projects being profitable and cost-effective, according to industry experts.

Speaking at the Energy Storage Network’s Annual Marketplace, Alicja Kowalewska-Montfot, commercial manager-energy storage at Gore Street Capital, said the asset owner had established a “very strong” retail base of investors, who would typically be more risk averse to newer technologies and that are now getting comfortable with this sort of asset class.

This in turn is showing that investors are getting more comfortable with the associated merchant risk and understand that in the absence of long-term or government-backed contracts, "they are indeed capable of functioning in the context of the fundamentals that are happening in the market, so the growth of renewables”.

She added that what is “incredible” about battery storage is that it never had a subsidy. Other clean energy technologies such as wind and solar have benefited from support schemes such as the Contracts for Difference (CfD) scheme, and while some solar and wind farms are now subsidy-free, a new round of the CfD opened in December.

“This to me is one of those very interesting stories of a technology that effectively proved to be capable of being merchant and unsubsidised pretty much from day one,” Kowalewska-Montfot said.

Indeed, managing director and head of Gresham House New Energy Ben Guest said: "It’s a cost-effective technology, and a reliable technology which is resulting in profitable, unsubsidised projects so clearly it’s an area that’s standing on its own two feet.”

The unsubsidised nature of battery storage was commented on by a number of panelists, with Monika Paplaczyk, investment director at Thrive Renewables, stating: “When you look at clean energy investment, or technologies, this is really the first one that works purely on the market forces right now that started from the market and without that many subsidy investments, if any.”

She continued that what is interesting for Thrive Renewables is that its been funding both of its two battery storage assets with equity, with storage “actually becoming quite a big part of our portfolio.”

While primarily focused on wind, Thrive Renewables acquired its first battery storage project, a 5MW/7.45MWh asset, in late 2020, while its second project, a 20MW asset, was acquired in March 2021.

“We’ve been very much looking at the batteries as a hedge to the renewables investment,” Paplaczyk said.

This is because at times when the renewable assets are struggling, for instance on low wind days, the battery storage comes online.

“We are almost, within our microcosm, trying to build ourselves a perfect hedge.”

Thrive Renewables has been considering going above two hour durations for its future battery storage projects, as well as considering how to make it easier from a technical perspective to add more batteries in the future to its existing assets.

Meanwhile, Guest went on to detail Gresham House's revenue model, which he said is focused on three accessible layers, these being trading, frequency response and Capacity Market revenues. He said the Capacity Market revenues are available to every battery, and will be 5-10% depending on the size of the battery and the revenues it is expected to make elsewhere.

Guest added that Gresham has always said from the outset that the ancillary services market including frequency response was going to saturate as it’s naturally a shallower market, while the deepest part of the market is trading.

He said that with the high levels of wind and solar expected on the energy system as the UK decarbonises, and the intermittency of that, storage will be needed and there will therefore be big trading opportunities.


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