Financing energy storage – Masterclass By Green Investment Group

STRICTLY CONFIDENTIALSTRICTLY CONFIDENTIAL
Energy Storage World Forum
Berlin,15 May 2018
Financing energy storage – Masterclass
Andrew Wilkinson

STRICTLY CONFIDENTIAL  Green Investment Group
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

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

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

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

An important revenue stream for storage projects, but contracts are short term and
pricing uncertain, introducing substantial recontracting risk
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

Long term contracts available (up to 15 years) but pricing and battery de-rating limit
revenues from this from this source
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

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

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)

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?

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

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

Source of energy with PPA

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

Other considerations
Use of capital
Resilience
Protection against electricity
price increases
Risk profile
Flexibility
Battery degradation

The information contained in this document is for general information purposes only. This document is strictly confidential and must not be
disclosed to any other party unless you have obtained the prior written consent of Green Investment Group Limited ("GIG"). This document shall
not be construed as an offer, invitation or solicitation to buy or sell any security or product or to engage in any investment or advisory activity or to
enter into a transaction or documentation of any kind. This document has been prepared and issued by GIG, an indirect subsidiary of Macquarie
Corporate Holdings Pty Limited ("MCHPL"), on the basis of information which is publicly available and sources that are believed to be reliable.
This document does not purport to contain all the information that may be required by any recipient to assess its interests in any proposal or
transaction. This document does not constitute and should not be interpreted as an investment recommendation or financial, legal, tax, accounting
or other advice of any kind. GIG and its affiliates and their related parties and funds managed or advised by any such entities and their respective
directors, officers, employees, consultants and agents (together, the "Macquarie Group") make no representation or warranty as to the accuracy,
completeness, timeliness or reliability of the contents of this document. There can be no guarantee that any targets or forward looking statements
contained in this document will be achieved or will prove to be correct. No member of the Macquarie Group owes or assumes any fiduciary duty to
any recipient of this document. To the maximum extent permitted by law, no member of the Macquarie Group accepts any responsibility or liability
for any loss whatsoever arising from the use of this document or its contents or otherwise arising in connection with it. Neither GIG nor MCHPL is
authorised or regulated by the Financial Conduct Authority or the Prudential Regulation Authority. Neither GIG nor MCHPL is an authorised
deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia) and the obligations of these entities do not
represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 ("MBL"). MBL does not guarantee or otherwise provide
assurance in respect of the obligations of these entities. © Green Investment Group Limited 2018
Important notice and disclaimer

Financing energy storage – Masterclass By Green Investment Group

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