The optimal revenue mix for battery energy storage is primarily comprised of grid balancing services, Gore Street Energy Storage Fund said, reiterating its commitment to one-hour systems.
Given rising battery supply costs, the lower capex of hour-long batteries compared to long-lasting batteries is driving excess returns, the company said in a portfolio update. of the first quarter of 2022.
As such, it will continue to aim for minimization of capital expenditure by designing assets well suited to providing network balancing services such as dynamic containment and firm frequency response. Ancillary services were in high demand during the first quarter of the year, in the context of high electricity prices and market volatility in Great Britain.
In April, National Grid ESO also launched its latest ancillary service Dynamic Moderation, which Gore Streets assets now play.
Its portfolio outperformed in the first quarter of 2022, with its UK assets averaging £19/MW/hour and February representing its strongest month. Revenue per MWh increased 65% in the first quarter of 2022 compared to the same quarter in 2021, and 22% compared to its quarterly average of 2021.
“We continue to base our strategy on current market conditions and revenue streams and therefore continue to favor one-hour battery systems for the UK market. We believe this translates into substantial cost savings and has greatly rewarded our shareholders,” said Alex O’Cinneide, CEO of Gore Street Capital, the firm’s investment manager.
“These assets offer significant flexibility to participate in several attractive income streams, including trading. In times of significant market price upheaval, this is a very profitable use for the company’s portfolio, which is ready to participate when ideal market conditions are available.
For its Northern Irish assets, Gore Street opted for batteries lasting less than 30 minutes. These can play in six ancillary services under uncapped DS3 contracts.
Its two Northern Irish assets fetched an average price of c. £31/MW/hour in February, generating approx. £2 million in net revenue in this month alone for a total of £4.9 million in net revenue in the first quarter from these assets.
The update tracks the three UK Gore Streets assets ranked among Modo Energy’s most revenue-generating assets as frequency response prices rise.
Among additional Q1 updates, Fluence has been selected as the engineering, procurement and construction contractor for the 57MW/57MWh Enderby battery storage asset at Gore Street in England. This site should be operational by the fourth quarter of 2023.
The company’s first asset in the Republic of Ireland is expected to be energized in May 2022, with an initial capacity of 30MW/30MWh at the Porterstown site near Dublin. A total capacity of 90 MW is available on site.
It will provide DS3 services on a six-year fixed-term contract starting in early July 2022, after securing a fixed-rate, capped contract with EirGrid.
The company has also recently expanded into Europe and North America, the former through the acquisition of a 90% stake in a 28 MWh operational energy storage asset in Cremzow, Germany, and the latter through the acquisition of a portfolio of eight energy storage assets in Texas.
Gore Street is eyeing further expansion and raised £150m from an initial share issue in April, which is to be used to continue its 1.3GW pipeline.