Gresham House Energy Storage Fund’s (GRID) full year portfolio revenues are expected to rise in 2024.
The UK investor in utility-scale battery energy storage systems (pictured) said it is confident operational portfolio revenues will increase in 2024 compared with 2023, having seen an improving trend since the low in first quarter 2024, as portfolio capacity grows and as revenue per MW rates recover.
Revenue per MW is rising due to improving market conditions as well as the ongoing onboarding of projects contracted under the previously announced tolling arrangements with Octopus Energy, said GRID.
As of 30 June 2024, portfolio revenues in the first half of 2024 were £17.9m, down 12.8% compared with the same period of 2023.
So far in the second half of 2024, portfolio revenues for the four months through to the end of October were £15.9m. Therefore, portfolio revenues for the first 10 months of 2024 were £33.8m. Given the 2024 performance to date and the demonstrable improving revenue trends in recent months, GRID expects full year portfolio revenues for 2024 to outperform full year 2023 portfolio revenues (which were £38.7m).
The ongoing drivers of revenue growth include further growth in capacity, which recently reached 845MW/1207MWh and is set to rise to 1072MW /1701MWh with the completion of the current pipeline in construction.
The fund also cited improving market fundamental including rising British renewable generation capacity, creating greater supply volatility; increasing power demand as the demand for electric vehicles and stabilising retail electricity prices drive modest growth; and
reduced excess supply as coal plants have now been retired.
An improving regulatory backdrop is also driving growth, said GRID
There are several important recent developments that the manager believes improve the outlook for British BESS.
The National Energy System Operator’s (NESO) commitment to accelerate the improvement in dispatch rates in the Balancing Mechanism. This was mentioned in NESO’s announcement of 16 October and in its plan for delivering Clean Power by 2030 published on 5 November.
The latter highlights the need for significant growth in renewables generation and low carbon flexibility. It also emphasises NESO’s commitment to a level playing field between technologies, which the Manager has been campaigning for since the summer of 2023. Lithium-ion BESS are the best commercial and environmental solution for delivering this flexibility said GRID, with NESO forecasting a requirement for 22GW of BESS by 2030.
More specifically and independent of the above, the Balancing Programme, which is aimed at creating the level playing field for battery storage, is approaching two significant milestones, added GRID.
These comprise the launch of the Quick Reserve service, offering Britisg BESS an additional revenue opportunity, by year end and the implementation of technology, to allow energy data to be automatically and continuously communicated by BESS to the control room, in the new year.
Both are expected to make BESS more dependable and visible to the control room.
GRID said t focus by government, since Labour came to power, on ‘Clean Power 2030′ has focused the efforts of the Department for Energy Security and Net Zero and NESO on what is deliverable by that date, being primarily renewables plus battery storage.
On 1 November, the London published its response to the Long Duration Energy Storage consultation, to which the manager responded, recommending that a Cap and Floor structure be implemented.
The government has now confirmed Lithium-ion batteries will be included and eligible to compete in the Cap and Floor arrangement.
GRID said it is pleased to see the government’s previous recommendation to exclude BESS has now been reversed. The manager believes this change could see projects of eight hours duration or more become commercially attractive in due course.
Further details about the scheme are expected to be published by Ofgem and government in 2025.
Fund manager of Gresham House Energy Storage Fund and managing director of Gresham House New Energy Ben Guest said: “We are pleased to see revenues in Great Britain improving as the natural volatility of renewable generation rises, creating more opportunities for our assets in wholesale markets.
“On top of this, we are seeing the benefit of our ongoing capacity rollout and duration increases come through as we begin to capitalise on the market’s recovery.
“We also welcome the positive regulatory steps being taken as part of the government’s focus on decarbonising the electricity system by 2030.
“This is moving the focus to immediately deployable technologies and hence onto the benefits BESS can offer the whole system today.
“As Great Britain’s reliance on renewable generation increases the requirements for storage increase significantly, both for short duration and longer duration.
“Lithium-ion is now the most competitive technology, in terms of cost and round-trip efficiency, at any duration up to at least 10 hours and will become increasingly competitive at longer durations as battery prices fall further.”