This presentation was presented at the masterclass session during 11th Energy Storage World Forum in 2018, Berlin.
Financing energy storage – Masterclass by Green Investment Group takes a deep look on Grid Connected Battery Storage Systems and improving the revenue streams of this business model:
- Energy infrastructure transition
- Choosing the right business model
- Accessing new revenue streams
- Implementing PPA structure
If you’d like to get a deep industry insights and learn in person from energy storage professionals, join our next masterclass at https://energystorageforum.com/register
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Introducing Green Investment Group
Europe’s largest team
of green infrastructure
investors
38+
green infrastructure
investment specialists
30+
structuring, technical,
asset management and
green reporting specialists
Led over
£15bn
of investment into
UK green infrastructure
Established
track record
Established
global brands
In-house operational,
technical and policy
expertise
Deep relationships
with infrastructure
focused investors
Strong relationships
with governments in UK
and internationally
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Energy infrastructure transition
Traditional Centralised Energy
Infrastructure
Large-Scale Generation
21st Century Distributed Energy
Infrastructure
Transmission
Distribution
Consumer
Energy efficiency Rooftop solar
Distributed storage
Low
carbon
transport
Smart grid
District
heat
Users can be smarter with
energy consumption
New revenue streams and
business models are emerging
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Batteries are flexible assets and can access multiple revenue streams – choosing the
right business model is important to create an investible structure
Grid connected batteries – GB context
Wholesale Arbitrage
Ancillary Services
Capacity Market
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Potential to provide reasonable revenues to a storage project but not contractual and
merchant in nature
1 – based off approximate modelling for a number of GB projects. Exact percentages will vary by asset and operational strategy employed.
Revenue streams – wholesale arbitrage
Wholesale Arbitrage
Ancillary Services
Capacity Market
Counterparty Wholesale market
Revenue
percentage1
c. 15%
Contracting
mechanism
Not contractual
Pricing driven by market movements
Performing arbitrage may mean that other
revenue streams cannot be accessed at
the same time
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An important revenue stream for storage projects, but contracts are short term and
pricing uncertain, introducing substantial recontracting risk
1 – based off approximate modelling for a number of GB projects. Exact percentages will vary by asset and operational strategy employed.
Revenue streams – ancillary services
Wholesale Arbitrage
Ancillary Services
Capacity Market
Counterparty National Grid
Revenue
percentage1
c. 79%%
Contracting
mechanism
Monthly auction
Contracts can be short term and up to two
years, however NG moving towards short
term contracts
Supply forecast to increase – uncertainty
on where pricing will move
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Long term contracts available (up to 15 years) but pricing and battery de-rating limit
revenues from this from this source
1 – based off approximate modelling for a number of GB projects. Exact percentages will vary by asset and operational strategy employed.
Revenue streams – capacity market
Wholesale Arbitrage
Ancillary Services
Capacity Market
Counterparty National Grid
Revenue
percentage1
c. 6%
Contracting
mechanism
Annual auction
Long term contracts available
Pricing collapsed in latest tender (< 1/2
previous tender) and capture dependent
on battery duration
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While flexible, a grid connected asset in GB (and many other grids) is a largely
uncontracted asset – this will not be universally investible
In front of the meter - summary
Multiple revenue steams
But, mostly uncontracted
Risk profile leaves investor
exposed to merchant pricing,
recontracting and regulatory
risk
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Placing a battery behind a meter can allow it access other revenue streams, adding to
the value of the available cash flows
Accessing additional revenue streams
Wholesale Arbitrage
Ancillary Services
Host Bill Savings
Capacity Market
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Peak energy prices are significantly higher in the UK than off peak prices – creating an
opportunity for load shifting
Source: Baringa
What revenue streams can be accessed?
Wholesale Arbitrage
DUoS (distribution grid charges)
Capacity Market Charge
TRIAD (transmission grid
charges)
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Important to create a contractual structure which allows these revenue streams to be
monetised and which adds to the investibility of the project
Host bill savings
Wholesale Arbitrage
Ancillary Services
Host Bill Savings
Capacity Market
How do we monetise this?
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A PPA structure can help the host more easily understand its potential savings and risk
profile while also providing the investor with contractual revenues
GIG’s preferred structure
Create contractual base
Price PPA to recover capex
Take returns from non-
contracted revenues
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PPA solution – how it works
Install battery Import energy from
grid at off peak
times
Export energy
during peak hours
via a fixed price
PPA
We charge the
battery at off peak
times at our cost
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Note: Figures based on indicative modelling. It assumes no import constraints. All bills and savings shown assuming customer is on a variable market power pass-through price and not fixed rates
Indicative Total Customer BillIndicative Peak Power vs. PPA Price
Overall indicative savings
0
500
1,000
1,500
2,000
2,500
Existing Consumption With Battery
Wholesale and PPA DUoS Triads Capacity Market Changes
Overall electricity
bill saving
0
50
100
150
200
250
300
2018 2019 2020 2021
Wholesale Cost and Charges Red Band DUoS
Triads CM Charge
Total PPA Price
Indicative 30-50% peak saving
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Other considerations
Use of capital
Resilience
Protection against electricity
price increases
Risk profile
Flexibility
Battery degradation