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Gresham House secures over £108m in Capacity Market auctions

Gresham House was awarded 180.4MW of de-rated capacity in the T-4 auction. Image: GRID.

Gresham House was awarded 180.4MW of de-rated capacity in the T-4 auction. Image: GRID.

Gresham House Energy Storage Fund (GRID) has secured over £108 million in revenues through the T-1 and T-4 Capacity Market auctions.

The battery energy storage company was awarded 112.0MW of de-rated capacity in the T-1 auction for 325MW of projects, which is expected to add £8.4 million in revenues over one year between 2022 and 2023.

It was also awarded 180.4MW of de-rated capacity in the T-4 auction for 463MW of projects, which is expected to add approximately £100 million over the 15-year period, assuming CPI at 2%.

“The Capacity Market is a vital tool for National Grid to ensure sufficient dispatchable generation to meet demand requirements as renewable generation expands, intermittency rises and as battery storage installations continue to lag renewable deployment,” Ben Guest, lead fund manager and managing director of Gresham House New Energy said.

“We are very pleased with the results of the latest auction and the large volume of contracts we were able to secure for the Company’s portfolio and pipeline. This increased level of contracted revenues also supports our existing financing arrangements and any potential future arrangements.”

These contract awards will add a predicted 15p per ordinary share to net asset value (NAV) over time, with 5p of this recognised in Q1 2022 and the further 10p in the subsequent quarters from assets which are under construction.

Both the T-1 and T-4 auctions closed at record high prices due to capacity constraints. The T-1 auction closed in the first round at £75/kW/y, with 4996.224MW of de-rated capacity across 226 pre-qualified Capacity Market Units (CMUs) securing contracts on 15 February.

It followed energy secretary Kwasi Kwarteng announcing a target of 5.36GW for the auction in January, which was set higher than the pre-qualified capacity due to the volatility of the energy market in the UK currently.

The T-4 Capacity Market auction cleared in the ninth round at £30.59 /kW/year, with a total of 42,364MW of capacity securing contracts on 22 February.

Both were impacted by the closure of coal and nuclear power plants in the UK, straining the available capacity.

Additionally, the volatility in the energy market currently driven by high gas prices impacted the T-1 auction in particular, with Kwarteng stating the target capacity “reflects the broader uncertainties within the power sector.”

Current±’s most recent Briefings webinar looked at the impact of the energy crisis on the Capacity Market, talking to EnAppSys’ Paul Verrill about the record clearing prices and the drive to decarbonisation.

GRID’s success in the Capacity Market auctions adds to its continued growth in recent years, announcing in January that it is targeting a market share of c.25% to 30% in the UK and Ireland in 2022 following an increase in earnings over 2021.

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