Gresham House Energy Storage (GRID) has issued a trading update which says that its manager is confident that operational portfolio revenues will rise in 2024 compared with 2023. There has been an improving trend since the low in the first quarter of 2024, both as portfolio capacity grows and as revenue per MW rates recover. GRID says that 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.

As of 30 June 2024, portfolio revenues in the first half of 2024 were £17.9m, down 12.8% compared with the first half 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, and so portfolio revenues for the first 10 months of 2024 were £33.8m. GRID says that, given the 2024 performance to date and the demonstrable improving revenue trends in recent months, it 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 / 1,207MWh and is set to rise to 1,072MW /1,701MWh with the completion of the current pipeline in construction; improving market fundamentals – specifically rising GB 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; as well as an improving regulatory backdrop, as discussed below.

Regulatory update

There are several important recent developments that GRID’s manager believes improve the outlook for GB battery energy storage systems (BESS). First is 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 (CP30) published on 5 November. GRID says that the latter highlights the need for significant growth in renewable 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 is the best commercial and environmental solution for delivering this flexibility, with NESO forecasting a requirement for 22GW of BESS by 2030.

Second, the balancing programme, which is aimed at creating the level playing field for BESS, is approaching two significant milestones, according to GRID’s manager. These comprise the launch of the Quick Reserve service, offering GB 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.

Third, the focus by government, since Labour came to power, on ‘Clean Power 2030’, i.e. a decarbonised grid by 2030, has focused the efforts of the Department for Energy Security and Net Zero (DESNZ) and NESO on what is deliverable by that date, being primarily renewables plus battery storage.

Fourth, on 1 November, the UK government published its response to the Long Duration Energy Storage (LDES) consultation, to which the manager responded, recommending that a cap and floor structure be implemented. The government has now confirmed that lithium-ion batteries will be included and eligible to compete in the cap and floor arrangement. The manager says that it is pleased to see that the government’s “previous inexplicable recommendation to exclude BESS has now been reversed”. The manager believes this change could see projects of 8 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.