The optimal revenue mix for battery energy storage is made up predominantly of grid balancing services, Gore Street Energy Storage Fund has said as it reiterates its commitment to one hour systems.
Given the increases in battery procurement costs, the lower capex of one hour duration batteries when compared to long duration batteries leads to excess returns, the company said in a Q1 2022 portfolio update.
As such, it is going to continue to target minimising capex by designing assets well suited to providing grid balancing services such as Dynamic Containment and Firm Frequency Response. Ancillary services were in high demand during the first quarter of the year, amid high power prices and market volatility in Britain.
In April, National Grid ESO also launched its latest ancillary service Dynamic Moderation, which Gore Streets assets are now playing into.
Its portfolio outperformed in Q1 2022, with its British assets averaging £19/MW/hour and February representing its strongest month. Revenue per MWh was up 65% higher in Q1 2022 compared to the same quarter in 2021, and 22% high than its 2021 quarterly average.
“We continue to base our strategy on current market conditions and revenue streams and therefore continue to favour one hour battery systems for the GB market. We believe this results in substantial cost efficiencies and has significantly rewarded our shareholders,” said Alex O’Cinneide, CEO of Gore Street Capital, the company’s investment manager.
“These assets offer important flexibility to participate in multiple attractive revenue streams, including trading. At times of material market price dislocation, this is a highly profitable use for the Company’s portfolio, which is ready to participate when ideal market conditions become available.”
For its Northern Irish assets, Gore Street has opted for sub-30-minute duration batteries. These can play into six ancillary services under DS3 uncapped contracts.
Its two Northern Irish assets achieved an average price of c. £31/MW/hour in February, generating c. £2 million of net revenue in that month alone towards a total £4.9 million net revenue achieved in Q1 from these assets.
The update follow’s three of Gore Streets’ British assets being ranked as some of the highest revenue generating assets according to Modo Energy, as frequency response prices rise.
Additional updates from the first quarter include Fluence being chosen as engineering, procurement and construction contractor for Gore Street’s 57MW/57MWh Enderby battery storage asset in England. This site is expected to be operational by Q4 2023.
The company’s first asset in the Republic of Ireland is expected to be energised in May 2022, with an initial capacity of 30MW/30MWh at the Porterstown site near Dublin. There is a total of 90MW capacity available on the site.
It will deliver DS3 services for a six-year term contract from the beginning July 2022, having gained a fixed-rate, capped contract with EirGrid.
The company also recently expanded into Europe and North America, the former through the acquisition of a 90% stake in a 28MWh operational energy storage asset in Cremzow, Germany, and the latter via the acquisition of a portfolio of eight energy storage assets in Texas.
Gore Street is eying further expansion, and raised £150 million from an initial share issue in April, which is to be used to pursue its 1.3GW pipeline.