Author: Solar Power Portal

Trio of risks holding back battery storage, panel says

Mis-selling, insurance risk and the failure of associated costs to fall alongside sell prices could hold back greater battery storage deployment, a panel discussion has revealed.

Last week’s Energy Storage Summit, organised by Solar Power Portal publisher Solar Media, brought together more than 350 representatives from the battery storage industry.

The opening day of the conference saw discussions on different deployment and co-location strategies and, in particular, what has been preventing more battery storage projects from being realised.  

Steve Shine, chairman at Anesco, said that one issue that was currently preventing greater deployment of battery storage was the failure of associated costs to fall in line with technology costs.

While battery technology sell prices have declined sharply, Shine said this was not being supported by similar reductions in other costs associated with battery deployment, such as accompanying components like switchgears and labour costs. Shine remarked that the core battery components are now “not even one-third” of the total development cost in some projects.

The most recent Lazard Levelised Cost of Storage Analysis from November last year forecast that lithium-ion capital costs could fall by 36% over the next five years, but warned that further cost reduction efforts should be focused on balance of system, components and other costs such as planning and permitting.  

Talk amongst the panel quickly turned to the potential of mis-selling storage or incorrectly explaining system capabilities, something which there is a “huge opportunity” for in the industry’s early days, Matt Allen, chief executive at C&I storage developer Become Energy, said.

The mis-selling of storage, particularly in the context of residential systems, has been discussed at length. Last April the Renewable Energy Consumer Code (RECC) revealed it was receiving around one consumer complaint surrounding battery storage each week and there are fears this number will grow in tandem with the market.

Allen said there was particular risk of battery storage systems being proposed with uninterrupted power supply (UPS) capabilities factored in for systems not suited or incapable of providing such power. He feared that “all it would take” would be for one incident involving a hospital relying on an inaccurately sold battery storage facility to provide UPS in the event of a blackout or power failure –an event that would “put lives at risk” – for the battery storage sector to be set back years.

It drew other members of the panel to discuss further and continuing problems convincing insurance companies to cover battery storage technologies.

Camborne’s Harry Vickers remarked that insurance companies are still reticent to back battery storage following a widely recognised incident involving a lithium-ion battery at the Kahuku wind farm in Hawaii more than five years ago.

The 30MW wind farm was combined with a 15MW battery before it developed a fault, triggering a fire that was estimated to cause more than US$30 million worth of damage. Firefighters did not combat the fire until seven hours after the incident started due to concerns surrounding how to combat a fire involving the energy-dense technologies.

Such concerns have been popularised by problems Samsung experienced with its Galaxy Note 7 smartphone, a product line which was discontinued after just two weeks following numerous reports of battery fires.

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‘Explosive’ battery storage growth to be driven by falling costs, renewables co-location

Over 9,000MWh of battery energy storage could be deployed in Britain over the next five years as the sector enjoys a trend towards “explosive growth” driven largely by the country’s clean energy transition, a market analyst has said.

Lauren Cook of Solar Media’s Market Research division spoke to SPP and sister publication Energy-Storage.News this week on the publication of a new report, ‘UK Battery storage: Opportunities & Market Entry Strategies for 2018-2022’.

Cook found that in just 12 months, the UK’s pipeline for new battery storage projects has grown by over 240%, with forecasted installations in 2018 set to rise more than 200% year-on-year. Opportunities are being created by a range of drivers including a national commitment to phase out coal, falling technology costs and more than 30GW of wind and solar capacity ripe for co-location with batteries.

“The market is growing and it’s changing rapidly. There are now projects completed on the ground. Once global companies start to see it’s not just a speculative market, it will make sense for them to think about how to enter the market and what the opportunities are for them.

“They will then need to know who is active in the market, who has these opportunities and who they will have to work with to take advantage of those opportunities.”

Many of the projects noted by Cook to have already been completed or under construction are standalone projects, with co-located solar plus storage sites yet to take off.

With Ofgem only recently having closed its consultation period on draft guidance for those seeking to add energy storage to their RO and FiT accredited sites, Cook maintains that a lack of clarity is sparking caution within the market.

“The solar farms tend to be owned by large investors so they have less appetite for risk. I think a lot of those are still getting their heads round storage at the moment and figuring out what it means for their business. They’ll be looking at adding storage to their solar assets but I’m not sure they’re ready to take it up on a large scale yet,” she said.

However, she added storage developers are already looking to bypass this uncertainty by considering the other advantages of co-location, particularly the savings in cost associated with sharing the grid connection and infrastructure already in place at an existing solar farm.

“That’s certainly how people will be getting around the uncertainty around the RO…there’s definitely a lot of potential there in the future because it makes sense from a technical perspective.”

No ‘typical’ revenue stack

Going beyond co-location potential, Solar Media Market Research also looked extensively at other business models surrounding energy storage deployment, another aspect of the industry analyst Cook said is changing fast.

With an emphasis on projects earning long-term revenues, it is becoming commonplace to speak of a “revenue stack” – earning multiple revenues streams for providing a range of services. However, Cook said, there is no such thing as a “typical” stack in the market today.

“I’m not sure there’s any such thing as a typical stack because there are many factors involved, but if you look at the timeline from the EFR of 2016 you had those projects [that] were successful then went on to apply for the Capacity Market (CM), T-1 and T-4 in early 2017,” Cook said.

“We then saw the FFR auctions happening throughout 2017. Those projects also participated in those auctions [and] new projects also came in. Then I think the most recent phase of the Capacity Market was just another opportunity to add to those stacks.

“It’s not just about stacking them in one moment – so having multiple sources at one point in time – it’s about stacking the revenue streams across the lifetime of the project and having long-term revenue.”

In megawatt-hours, battery energy storage capacities installed in the UK by the end of 2022 will be 50 times what they were as 2017 ended. The report also covers a predicted trend towards longer duration storage in future, comprehensive evaluations of leading players in the industry and analysis of stakeholders.

Learn more about ‘UK Battery storage: Opportunities & Market Entry Strategies for 2018-2022’, here.

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Moixa secures £5 million investment in latest Japanese advance

Moixa has made greater strides into the Japanese market after securing £5 million investment from trading house Itochu, which will install the British company’s GridShare aggregation platform as standard on its own home battery product.

Less than a year after securing £500,000 of investment from major utility TEPCO, the latest funding will aid Moixa’s international expansion, not least in Japan where it will be able to launch GridShare to the battery market.

Meanwhile Itochu will promote the platform, which uses artificial intelligence to optimise the performance of their battery based on their patterns of behaviour, the weather conditions and market prices, as well as adding it to its own Smart Star battery systems.

Since entering the residential energy storage market in 2013, over 6,000 9.8kWh Smart Star units – equivalent to around equivalent to 55MWh – are expected to be sold in Japan by the end of March 2018. Itochu will then install GridShare as standard on its products by the summer of 2018.

Koji Hasegawa, general manager of the industrial chemicals department at Itochu, said: “Moixa has pioneered battery management, and we are proud to be investing and working together to target the rapidly growing energy storage market in Japan.

“Moixa’s GridShare will help our customers get more value for their home batteries and will offer solutions to help our partners manage Japan’s low-carbon transition.”

The British battery firm, which recently secured £250,000 from the UK government to expand GridShare to include aggregation of third party units for the first time, will now seek to expand its partnerships with Japanese utilities and electric vehicle manufacturers, and to market services to electricity networks.

In Japan, the 10-year period for the solar feed-in-tariff scheme will begin to expire in 2019. This is expected to lead to an increase in self-consumption of power that is generated using solar systems and energy storage systems, as one Japanese company, Solar Frontier, told our sister site Energy-Storage.News in 2016. From 2020, all new Japanese homes are also expected to be required to meet net zero or zero energy standards, something which could have a strong impact on uptake of batteries at household level in a country where the majority of people still buy a plot of land on which to build their own home, as opposed to moving into recently-vacated exsiting residences.

Simon Daniel, chief executive of Moixa, said: “Itochu is a major player in the global battery market and this partnership provides a real opportunity for us to expand our business in Japan and provide GridShare technology to many global battery companies.”

The company is also planning trials in the US and Europe this year.

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Shell to become single off-taker of largest solar farm in England

Shell Energy Europe has signed an initial five year power purchase agreement (PPA) with British Solar Renewables (BSR) to take power generated at England’s largest solar farm at RAF Lyneham.

The utility will become the sole off-taker for the 69.8MWp Bradenstoke solar power plant, which generates approximately 65GWh of clean solar energy on an annual basis following its completion in March 2015. It is the largest solar farm to have been developed in England and is second-largest in the UK only to the Welsh 72.2MW Shotwick site, which had been developed by BSR and is now owned by Foresight.

BSR, which manages and operates the site on behalf of owner Siem Europe, organised the deal in its capacity as manager of the solar farm utilising its past interactions with Shell to bring the deal together.

Speaking to Solar Power Portal ahead of today’s announcement, BSR’s managing director and chief financial officer Graham Harding explained: “As asset manager one of our obligations is on behalf of the owner to negotiate the PPAs on an ongoing basis so we’ve been exploring different opportunities in the market place.

“Shell is a relationship we’ve had in various forms for a while but this is the first major piece of work that we’ve transacted on with them. Siem as a group also has relationships with Shell … so it was a natural evolution of various discussions that were going on.”

The deal comes as Shell’s integrated energy marketing and trading company is seeking to grow its footprint in Europe’s renewable power market and is in line with the wider group’s strategy to develop a new energies business focused on new fuels and the power value chain. 

The power generated from the Bradenstoke solar power plant will be supplied to Shell Energy Europe’s customers in the UK seeking to meet their needs with renewable energy.

Jonathan McCloy, general manager for north-west Europe at Shell Energy Europe, said: “The UK is one of our key markets for power and we’ve been exploring ways to increase our power presence in the country on both the buy and sell side. The deal with BSR helps us achieve this goal and is a significant boost to our renewable power portfolio in the UK.”

SPP understands that the PPA could be extended beyond the current five-year arrangement should this be advantageous for both parties, with Harding stating that PPAs provide “stability in a volatile energy market”.

The deal with Shell allows BSR to grow its expertise in large scale PPA deals following agreements with HSBC for power from the 61MW Swindon Solar Farm – now owned by Rockfire – and UPM in relation to the 72.2MW Shotwick solar farm, which is now owned by Foresight.

“It’s something that we’re very keen to develop a skillset in; we’ve got some very skilled and knowledgeable people in order to negotiate what we hope are beneficial deals for both sides,” Harding added.

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Explosive growth in UK energy storage pipeline revealed by Capacity Market register

With the release of the most recent Capacity Market pre-qualification register, the UK’S utility-scale battery storage pipeline has now reached nearly 8GW. Over the last few months we have seen a sharp rise in the number of planning applications with over 1.3GW of battery storage projects being submitted since the beginning of September 2017 alone.

Based on the trend of applications throughout the year it was clear that the Capacity Market register was going to include a lot of battery storage but the number and capacity of projects will have surprised most people.

The applications include a wide range of project sizes and with the Capacity Market making up just one part of a project revenue it opens the auction up to those with different business models. This could include smaller projects located behind the meter and larger projects either co-located with a generator or stand-alone, seeking to use the Capacity Market income as secure additional revenue in addition to the primary income, which could include ancillary services or arbitrage.

However, even with the clear interest in energy storage shown by the participation in the Capacity Market, there remain big question marks about how much of it will compete in the upcoming auctions once the deadline for planning applications passes and the changes to de-rating force some developers to withdraw projects. Research from the Solar Media market research team shows there could be up to 2GW of prequalified projects that have not yet submitted planning applications. There is also the possibility that some of the projects that were rejected will successfully appeal and be able to compete.

It has not proven simple to calculate exactly how much battery storage is participating in the Capacity Market. Anyone who has had a look through the results will see duplicates and multiple applications on some sites, which seems to be a strategy used by some developers and there will be different reasons behind this. In some cases we can see the total capacity of a site in the planning documents split into multiple projects in the Capacity Market. The battery duration is not included in the data released by National Grid and it is likely that this accounts for some of the duplicates, as companies will have different strategies to react to the de-rating changes which were unclear at the time of application.

The graphic below shows that there are around 500MW of projects at the “ready to build” stage, it is likely that the majority of these will be built next year and the number could be even higher based on the results of the T-1 auction. The projects from the Capacity Market register mainly fall into the “in planning” and “proposed” categories. If the developers of these projects decide to compete in the auction these projects are likely to be the ones with a chance of success in the T-1 or T-4. 

The “proposed” category is important at this stage as it shows there is a long-term pipeline developing, although the “on hold” projects show that there is already a significant amount of drop off happening in the pipeline with some speculative projects being mothballed at the early stages before the main investment is made.

The installed capacity of battery storage projects has shot up from the 100MW reported in November with the completion of several large projects and now sits at around 200MW. This will increase in the first quarter of 2018 as the remaining projects with EFR contracts approach the deadline for completion at the end of February.

However, looking further into the year it becomes less clear and the results of the Capacity Market auction, especially the T-1, begin to have much more of an impact. There are around 2GW of battery storage projects prequalified for the T-1, with a delivery year of 2018/2019, which shows a level of confidence that these projects could be developed within a year and therefore are already at an advance stage of development, or are just waiting for the green light to go ahead.

In 2017 we have seen the interest in battery storage in the UK evolve into actual projects and opportunities. In 2018 as the pipeline grows and the regulations become clearer we will see even more projects being completed and successful business models being revealed.

For more information about proposed and operational storage projects, the UK Battery Storage Project Database report from Solar Media market research provides comprehensive details across more than 200 battery storage projects. For more information, click here, or email: marketresearch@solarmedia.co.uk.

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Solar-plus-storage project set for Wales following successful legal appeal

Wales’ largest solar farm, complete with significant energy storage capacity, is to be built on Anglesey after Countryside Renewables successfully overturned a decision in November refusing planning permission.

The 50MW development was originally proposed in February to be built at Llanbadrig in Anglesey, to power around 15,500 homes annually while also using battery storage to act as a “peaker plant” for energy distribution.

Despite planning officers recommending approval for the site, the proposal was refused by the Isle of Angelsey county council on the basis that it was not considered sufficient to allow departure from policy ADN2 of the Development Plan, which limits development of solar farms over 5MW.

However, Countryside Renewables sought legal opinion on the ruling which found that that the planning application was in fact in accordance with the policy and “the reason for refusal is not justified and would not be sustainable on appeal”.

As a result, the planning committee are thought to have reconsidered their position and have permitted the application.

However, the new plans suggest the site may have been moved following an investigation of the region to address council concerns, with the site slated for land just south of the Llanbadrig area.

Neither Countryside Renewables or the council could be reached this morning to confirm the details of the permission, or provide a capacity figure for the energy storage to be installed on site. However, planning shows that 32 containerised battery storage units will be installed, and the developer will have to submit details of the technology to be used in advance of construction beginning.

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Ofgem reassures solar developers over subsidy accreditation when adding storage

Ofgem has sought to reassure solar farm owners that it will not withdraw accreditation to subsidy schemes without having a good reason to do so as it continues to work on guidance for co-locating energy storage assets with solar.

In September the regulator made the ‘game changer’ decision to allow solar developments to retain their accreditation under the Renewables Obligation (RO) when supplying electricity to batteries, after Anesco revealed it had done so at three of its 5MW sites.

However, Ofgem was not ready to publish any guidance to the rest of the sector on how this could be achieved while Anesco, which intended to approach investors on its 101-strong portfolio of solar farms, said it would not be publishing its own methodology.

Speaking at Tuesday’s Solar Trade Association (STA) Market Access and Systems Integration conference, Luke Hargreaves, head of renewables at Ofgem, revealed that the guidance was intended to be published this month.

But the regulator has run into issues in allowing sites to retain RO and FiT accreditation due to the absence of energy storage from the legislation.

“The legislative framework for both the FiT and the RO do not make any reference whatsoever to storage. We have the same tools to work with as industry; we do not know the answers. In the vast majority of cases where our team has made decisions and established precedents, we’ve put them into our guidance documents…but very few decisions have been made,” he said.

“The guidance was meant to be out this month…it isn’t straightforward because of the absence of clarity in the statute.”

In the absence of this guidance, Hargreaves added that Ofgem would not seek to revoke accreditation as a first response, instead hoping to work with the sector to reach beneficial conclusions.

“I know there is a lot of nervousness around Ofgem making a determination such that accreditation could be whipped away from you. The legislation makes prescription that for the FiT and RO the authority may withdraw an accreditation but then it goes on to say why in certain circumstances, so we can’t invent eligibility hurdles,” he said.

“If we’re going to take an accreditation away we must have a reason for that. It is a very big decision for us to make as understandably it is laden with legal risk. It’s not a light-touch decision, it’s not one that we make very often at all.”

“We certainly in the context of administering schemes are not here as a block. We operate within the legislative framework and we have to make certain decisions and those decisions can only be made based on [what’s in] the statute,” he added.

Ofgem will be attending a roud table discussion on co-location with renewable generation on Monday (13 November), hosted by the STA, to gain further feedback and grow its guidance further. The regulator told SPP the document will be released before Christmas but was unable to offer more specific information around the publication.

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100MW installed, but this is just the beginning for large-scale battery energy storage

The UK’s large-scale battery storage installations have reached 100MW of capacity, made up of around 50 individual sites larger than 250kW. The data from our UK Battery Storage Project Database report shows that these projects can be split into three categories: pre-2017, stand-alone in 2017 or co-located with generation in 2017.

We have chosen these categories as 2017 was the first year where commercial projects began to take off. Before 2017 the majority of completed batteries were demonstration or research projects, such as the Leighton Buzzard battery by UKPN or the Northern Powergrid battery storage trial in North East England, and account for around a quarter of  installed capacity.

Of the 100MW nearly 60% of capacity added in 2017 has come from batteries co-located with generation, both renewable and non-renewable. Solar Media Market Research has good visibility of the batteries co-located with solar farms and these have been both new build and retrofit projects. Solar farms either added the battery at the build stage, before the RO deadline in March when new solar capacity was added or more recently as part of subsidy-free solar projects.

In 2017 we saw the beginning of commercial stand-alone batteries with Hazel Capital completing two projects; Lockleaze a stand-alone battery and Staunch a hybrid battery/engine and E.On with the completion of Blackburn Meadows. Both of these companies have projects with capacity market contracts either from 2015 or 2016, with the E.On project also receiving an EFR contract, which will be in place up until the capacity market contract begins. Meanwhile, Staunch by Hazel Capital also has a two year firm frequency response (FFR) contract from 1 October 2017 to 30 September 2019.

But what can we expect in the coming months? In the near term we have visibility of projects that have won contracts and when they are due to start. For example the 200MW of successful EFR projects from 2016 will need to come online by the end of February. Out of the eight projects, we know of one that has already come online, with the others following closely.

Out of these projects five also won contracts in the 2016 T-4 capacity market, which will follow the four year EFR contract. With this in mind we can expect to see the remainder of the EFR projects built in either Q4 2017 or in the first 2 months of 2018 which would be an addition of around 190MW, effectively tripling the UK’s installed battery capacity within the space of a few months.

With five of these also winning capacity market contracts, and by looking at those that have been completed, we start to see the capacity market becoming a recurring and important trend within a stacked revenue model.

Going forward we know that there will not be any more rounds of procurement for EFR in its current form but we have seen interest from battery storage developers and owners in FFR increasing over the past few months. Battery storage projects have begun to submit applications and after some trial and error there are now at least four large battery projects with FFR contracts.

The developers or aggregators submitting these projects have used different variations of availability and price and after a lot of rejections we are now seeing some of these companies having success in this area. Once again we are seeing projects with capacity market contracts due to start as the FFR contracts come to an end.

The pre-qualification window for the 2018 capacity market recently closed and there are projects which have already made known their intention to participate. The upward trend in planning applications over the summer also suggests that this year’s capacity market will be hotly contested.

National Grid previously announced its intention to change how it procures balancing services such as FFR and EFR so going forward project owners know that this area will be changing. It therefore appears that the relative stability and longer term contracts of the capacity market are highly important in making the business cases stack up for new battery storage projects.

Capacity market pre-qualification results will be announced on the 10 November and a lot of questions will be answered about who is active and how much capacity will be competing for contracts.

The main conclusion we can come to at this point is that over the lifetime of a project new revenue streams and functions of the batteries will emerge and the technology will evolve to serve these needs. But it is important for these companies to secure some level of revenue to get their projects off the ground in order to take advantage of these opportunities as they emerge.

For more information about proposed and operational storage projects, the UK Battery Storage Project Database report from Solar Media market research provides comprehensive details across more than 200 battery storage projects. For more information, click here, or email: marketresearch@solarmedia.co.uk.

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Hazel Capital bought as Gresham House enters ‘one of the most sought-after market segments’

Hazel Capital has been bought up by investment manager Gresham House through a combination of cash and newly issued shares, which includes new investment in three energy storage projects.

Gresham House New Energy has been set up to take on a strategic focus on renewables and new energy infrastructure, which Gresham House describes as “one of the fastest and most sought-after market segments in the alternatives sector”.

The new division completed the £2.6 million acquisition of Hazel Capital, which manages a number of battery storage projects including the stand-alone 15MW Lockleaze project and the 20MW hybrid battery/engine project in Newcastle-under-Lyme, known as Staunch.

The total consideration initially includes £600,000 in cash for the acquisition of Hazel Capital’s asset management business, which will continue to be headed up by Hazel Capital’s managing partner Ben Guest alongside partners Bozkurt Aydinoglu and Gareth Owen.

The remaining £2 million, comprised of £750,000 in cash and £1.25 million satisfied through the issue of new ordinary shares, includes an investment into three storage projects, one of which is currently under development.

For the financial year ended 30 April 2017 Hazel Capital’s asset management business generated an operating profit of £900,000, excluding all development profits.

Ben Guest commented: “This is a natural next step for Hazel Capital. Our expertise in renewables and battery storage will complement Gresham House’s existing strategies of private equity, infrastructure, strategic public equity and real assets.

“At the same time, we will gain from the experience and skills of the wider Gresham House team and will be able to leverage the resources from being part of the Group’s growing platform for differentiated investment strategies.”

Gresham House Asset Management, a wholly owned subsidiary of the company, has also been recommended as investment advisor for two renewable energy venture capital trusts (VCTs) managed by Hazel Capital.

These VCTs were launched in 2010 and have successfully invested in 19 projects, currently owning and managing six feed-in tariff and two ROC ground-mounted solar projects.

Pending shareholder approval from the VCTs, the new division will have an aggregated AUM (total market value of assets under management) of over £100 million plus a pipeline of development assets.

Anthony Dalwood, chief executive of Gresham House, said: “The Hazel Capital team’s skills and experience will significantly add to the Gresham House group.

“Gresham House New Energy will leverage the specialist technical and investment expertise of the Hazel Capital team to drive organic growth, including new product launches, whilst further diversifying the Gresham House product portfolio.”

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Investors journey into the ‘grey area’ of energy storage revenues

Investors in renewable energy technologies have had to undergo “a journey” from the fixed revenue offered by traditional solar projects to the “grey area” of energy storage revenues.

That is the view of Chris Pritchett, a contract lawyer and partner heading up the energy and environment practice at Foot Anstey. He recently served as moderator for the ‘Developers and financiers debate’ at the Energy Storage Conference at the Solar & Storage Live 2017, in which fund managers and project developers engaged in a robust discussion around the technologies.

Andy Colthorpe, editor of sister title Energy-Storage.News, caught up with Chris after the session for an in-depth interview on camera.   

“[With the feed-in tariff (FiT), renewables obligation (RO) and PPAs]… you got used to a quite straightforward and really quite easily modelable return. You knew what it was going to be – it was government-backed for 20-25 years. There has been a journey whereby the investment community has had to detach themselves from that way of thinking.

“It’s been taken away from something that’s secured and financed on the basis of a revenue stream that is fixed. That creates a bit of a grey area but there is a market there, it’s not going away and the people who are well placed to take advantage of that market will be those with battery assets deployed and ready to go.”

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