The UK energy storage market is proving attractive to investors, but more due diligence is required to maximise revenues
A large number of investors are seeking opportunities in the UK energy storage market, new research indicates. Data published by RenewableUK just over two weeks ago showed that the amount of energy storage projects in the UK that are operational, under construction, consented or being planned has increased by more than two-thirds in the last year when measured by capacity.
RenewableUK’s ‘EnergyPulse’ energy storage report showed that the total pipeline of battery projects has increased from 50.3GW a year ago to 84.8GW, an increase of 68.6 per cent, or 34.5GW. Operational battery storage capacity has grown to 3.5GW, while the capacity of projects under construction has reached 3.8GW. A further 24.5GW has been consented, 27.4GW has been submitted in the planning system and 25.7GW is at an early stage of development, but yet to be submitted, according to RenewableUK.
England has 60 per cent of the overall pipeline of UK projects (50,763MW) including the highest capacity of fully commissioned battery storage projects (2,872MW). Scotland has the second largest pipeline at 29,506MW.
Larger projects becoming the trend
RenewableUK also noted that there has been a move towards larger projects, with the average size of schemes submitted into the planning system in the last year increasing to 80MW – just over a decade ago the average project size was just 2MW, and by 2021 it had grown to 54MW. The surge in the UK’s battery project pipeline is highlighted as evidence of the high levels of investor confidence in the sector. “This demonstrates that there’s a huge appetite among investors to enter this rapidly growing market,” Barnaby Wharton, RenewableUK’s director of future electricity systems, said. He added: “Getting viable projects connected to the grid is a priority, and industry has welcomed progress on reforming the connections process. While the battery market is booming, we need investment in even larger projects to store energy for longer, unlocking further opportunities for us to scale up this cutting-edge technology. We’re still waiting for the government to confirm how they will stabilise revenues for long duration projects.”
The UK Government has clearly stated the tremendous financial benefit energy storage could offer the nation’s economy. The Department for Business, Energy & Industrial Strategy has said that technologies “such as electricity storage could save up to £10 billion per year by 2050 by reducing the amount of generation and network needed to decarbonise and create 24,000 jobs”.
Which are the 5 biggest UK energy storage projects?
As of July 2023, the five largest energy storage projects by capacity in the UK were as follows, according to GlobalData:
1. Sunnica Solar-plus-Battery Energy Storage System
A lithium-ion battery in the UK, which is owned and developed by Sunnica, and will be commissioned in 2025. The project is located across three sites in East Cambridgeshire and West Suffolk. It would connect to the national electricity grid at the Burwell National Grid Substation.
2. EFDA JET Fusion Flywheel Energy Storage System
Located in Abingdon, England, the UK, the electro-mechanical battery storage project uses flywheel storage technology, which works by accelerating a rotor to a very high speed and maintaining the energy in the system as rotational energy. It is the only project in the top five that is not a lithium-ion battery. The project is owned by EFDA-JET.
3. Penso Power-Hams Hall Battery Energy Storage System
Capacity: 350MW / 1,750MWh
A lithium-ion battery energy storage project located in Hams Hall, North Warwickshire in the UK. The project is developed by Luminous Energy and Penso Power. Luminous Energy says the project, announced in 2022, is expected to provide a “broad range of services to support the UK electricity system including potentially longer duration services, with scope for more than five hours duration”. Construction is expected to begin in 2024 with an anticipated grid connection date in 2026.
4. DP World London Gateway – Battery Energy Storage System
Capacity: 320MW / 640MWh
The DP World London Gateway – Battery Energy Storage System is a lithium-ion battery located in Thurrock, Essex, in the UK. The project was announced in 2020 and will be commissioned in 2025. The £300m project will provide power for over 450,000 homes once fully complete.
5. Fortress Solar PV Park-Battery Energy Storage System
A lithium-ion battery energy storage project located in Kent in the UK. The project – which was announced in 2020 and will be commissioned in 2023 – is owned by Quinbrook Infrastructure Partners and developed by Hive Energy and Wirsol Energy. The Cleve Hill project – which incorporates 373MW of solar capacity – is expected to generate enough renewable power each year to meet the power needs of over 100,000 UK homes and help reduce carbon emissions by 164,450 tonnes every year.
How much new storage capacity will the UK add?
It is forecast that the UK will remain Europe’s leading grid-scale storage market for the rest of this decade and into the next. Wood Mackenzie has predicted that the UK will add 25.68GWh of new grid-scale energy storage capacity during the period 2022-2031, more than twice the amount that will be added by Europe’s second fastest-growing market, Italy.
More due diligence required in future
However, energy storage asset owners operating in the UK market are now being advised to incorporate more revenue stacking from wholesale and the balancing market as these will be more lucrative options for battery storage investors in future. This is because, traditionally in the UK market, most battery storage volume has been allocated to frequency response markets, but these markets are becoming saturated and therefore less profitable. Consequently, the onus is now on asset owners to refine their strategies because frequency response will no longer generate the same returns.
In addition to wholesale and balancing market revenues, another possible option that could be considered is ‘Net Imbalance Volume chasing’, that is, earning revenues from the system price, which fluctuates dramatically. In a nutshell, this means battery asset owners aim to be paid to discharge energy into a short system (when demand exceeds generation) and pay to charge up from a long system (when generation exceeds demand). The caveat here is NIV chasing is a high-risk strategy.
In general, battery asset developers and investors in the UK generally have to become more savvy when it comes to deploying battery assets. In particular, as dataset provider LCP Delta has warned, more due diligence is required to ensure that specifics such as storage duration, technology and location are all given proper consideration with a view to maximising profitability.