ENERGY STORAGE

Gresham House Energy Storage Fund signs tolling agreement with Octopus Energy

June 5, 2024

Gresham House Energy Storage Fund has entered into a tolling agreement with Octopus Energy that covers 14 Gresham House projects totalling 568MW/920MWh.

Under an energy storage tolling agreement, the energy storage project developer is responsible for obtaining site control, permits, interconnection rights, equipment, and construction contracts, as well as achieving agreed-upon milestones such as a target commercial operation date and a guaranteed commercial operation date. The buyer – often a utility company – pays for the electricity used to charge the energy storage system, and receives the right to charge/discharge the system for energy and ancillary services.

Gresham House has secured the tolling agreement with a subsidiary of Octopus Energy,  which will provide two-year fixed-price contracts for approximately half of Gresham House’s 1,072MW target portfolio starting in a phased manner from 1 July 2024.

For the term of these arrangements, Octopus will pay a fixed fee per MW on these projects in return for the use of each project’s batteries. The fixed fee rate is determined by the duration of the asset – expressed in hours – and excludes capacity market payments which the projects will continue to receive separately.

Including Gresham House’s capacity market revenues across its full portfolio, the majority of which are for 15 years index-linked to CPI, the fund expects to have annual contracted revenues of around £43mn during the tolling arrangement.

This contract underpins Gresham House’s revenues and provides a greater degree of certainty over the fund’s cash flows. For the portion of the portfolio contracted with Octopus, the company has “secured a higher price than recent weak performance at the start of the year, and at a competitive price for underlying battery economics”, a statement said.

Following this agreement, which allows time for assets to be onboarded by Octopus and allows Gresham House to complete the construction and augmentation of projects, the end-of-2024 portfolio is expected to be approximately 50 per cent hedged, Gresham House said – 568MW/920MWh of the target portfolio will be contracted under the agreement while 504MW/776MWh will continue to operate under existing optimisation agreements.

Kieron Stopforth, head of flexibility at Octopus Energy, said: “Every year we’re letting hundreds of gigawatt-hours of clean energy go to waste because our system isn’t flexible enough – not only that, we also have to pay for this senseless waste. Batteries play a key role in unlocking the clean and cheap energy system, storing green energy when it’s plentiful and providing it to the grid when energy is expensive. Through this landmark deal with Gresham we’re not only increasing the size of our virtual power plant to over 1.5GW, we’re also unlocking the power of flexibility to drive down costs for consumers across the country.”

Ben Guest, fund manager of Gresham House Energy Storage Fund plc and managing director of Gresham House New Energy, said: “The fixed-price contracts with Octopus secure revenues for GRID at levels which, for the time being, are above those currently being achieved from the merchant revenue stack available in the national wholesale and balancing markets. They demonstrate the value batteries offer in balancing the supply (power generation) and customer demand that are managed by retail and wholesale market players, in addition to balancing supply and demand at a national level.”

 

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