Wholesale power market increasingly attractive for UK battery operators - EDF

Author: Eugene Poon

2021/03/08

LONDON (ICIS)--UK power battery storage operators are likely to enter the wholesale and balancing power markets over the next couple of years amid increasing price volatility driven by further renewables build-out, according to Stuart Fenner, head of energy trading services at EDF.

Significant balancing issues have plagued the UK power grid as intermittent renewables take up a larger share of the generation stack. This brings an increasing need and opportunity for flexibility via battery storage assets to help facilitate a transition towards achieving net zero.

UK battery operators’ main revenue stream comes from providing ancillary services. National Grid ESO is expected to launch new frequency response products by end of Q1 2022.

However, the ancillary services space will become saturated over time. Therefore, capturing revenue through wholesale markets will become increasingly important.

“In the first couple of months of 2021 we saw a number of days where there was significantly more value to be captured from the wholesale market than from Dynamic Containment (the highest paying of the ancillary services),” Fenner said.

On 8 January, the UK power intraday balancing market traded at a high for nearly two decades of £4,000/MWh.

“The increased price volatility resulting from further renewables build-out will see wholesale and balancing mechanism revenues becoming the preferred route to market for some assets over the course of the next couple of years,” Fenner added.

PROJECTS

EDF have recently entered an agreement with Downing LLP, an investment managing firm to manage their new 50MW battery storage asset in Southampton.

The project is expected to begin operations in July. This move marked a part in the larger underlying trend for EDF and the sector alike. EDF already operate a similarly sized asset on behalf of Gresham House, an energy storage investment fund.

Fenner said that “EDF currently has the largest contracted portfolio of batteries in the UK, with 195MW operational batteries and a further 195MW contracted which are under construction.”

The UK’s total operational battery capacity is approximately 1.2GW. EDF expects this capacity to grow to over 5GW by 2025.

This is roughly in line with National Grid’s forecast for installed capacities to hit “5-7GW in 2025 and 7-15GW in 2030”.

A 320MW storage project was approved by the department for business, energy and industrial strategy (BEIS) late last year, the largest of its kind so far.