Rendering of InterGen’s Gateway 320MW/640MWh project, one of the awardees of a 15-year contract in the T-4. Image: InterGen.

The award of contracts to 1GW of battery storage was the “biggest news” to emerge from the latest round of Capacity Market auctions held in the UK, according to energy consultancy EnAppSys.

Energy-Storage.news’ sister site Current± reported the full results earlier this week of the UK’s T-4 Capacity Market auction, awarding contracts beginning in the 2025/2026 window. It cleared at a record high price of £30.59 (US$41.03)/kW/year, due largely to the decommissioning of old assets and higher capacity needs. 

While gas plants were the biggest winners, awarded 27,632MW of contracts from the 42,364MW total, interconnectors got just under 7GW and pumped hydro storage 2.5GW, it was the 1,093MW of battery storage contracts which should be paid closest attention, EnAppSys director Paul Verrill said. 

“Battery project winners are the biggest news in this auction, with many new-build battery projects having chosen the year with the highest ever clearing price for a T-4 auction to come online,” Verrill said. 

“This is a major boost in particular for those units that were able to secure long-term contracts.”

Around 8.3GW of battery storage registered to participate, although due to de-rating rules, this was equivalent to more like 2.3GW. EnAppSys’ director said de-rating meant battery assets will only see about 30% of the CM payment price. 

Awarded contract lengths range from 1 to 15 years. Another industry expert, Chris Matson, partner at energy system analysis and modelling group LCP said that the planned decommissioning of five nuclear plants and the retirement of coal off the system entirely by 2025 left a gap in supply which new-build resources could fill at higher capacity prices.

‘Watershed moment’

Matson called the results a “watershed moment” as the clearing price smashed a previous record of £22.50/kw/yr. With battery storage making up the majority of new capacity awarded 15-year contracts (3.3GW in total, or 1.0GW de-rated for duration) the auction is representative of the energy grid’s transition, he said. 

Aurora Energy Research, another industry expert group, said the contracted amount for battery storage was up by around 800MW from last year’s T-4. More than 60% of the new awards to battery storage were for two-hour duration resources. 

Among the developers celebrating 15-year contract wins were the UK arm of Singapore-headquartered Sembcorp, and Intergen, a domestic player and relative new entrant to the space better known to date for legacy thermal power plant technologies and wind power.

Sembcorp won for 150MW of two-hour duration battery storage (300MWh), expected to be operational by 2023 and part of a planned 360MW battery energy storage system (BESS) project, which will be alongside another 120MWh in the company’s total UK BESS portfolio. 

Meanwhile, InterGen’s contract was for the UK’s largest planned battery storage project so far, the 360MW/640MWh Gateway project near London in southern England. InterGen said the CM contract “will cement the development of the project,” which will cost around £200 million and is set to begin construction next year. 

Energy storage technology company Fluence has been revealed as BESS technology provider for the project, which InterGen said could be later expanded to 450MW/900MWh. The developer also has a number of other sites in development, it said, including a potential 550MW/1,100MWh plant in Lincolnshire, northern England. 

“We are delighted with the result of the Capacity Market auction, which represents a big step forward for our Gateway storage project and for the country’s net zero target,” Jim Lighfoot, InterGen CEO said.

“Our mission is to deliver the flexible electricity solutions that everyone can rely on in a low carbon world and battery storage helps us do this.”

The T-4 auction’s awarded capacity came in at just under the 43.6GW of targeted capacity. The contract awards came in at a total cost of £1.3 billion. 

Result follows award of 385MW in T-1 year ahead auction

Earlier this month, the UK’s T-1 CM auction — a year-ahead auction which guarantees capacity for delivery during stress events from 2022-2023 — saw a total 4,996.224MW of de-rated capacity awarded across 226 Capacity Market Units (CMUs).

They cleared at the maximum price of £75/kW/yr, the highest price ever seen in the UK’s Capacity Market and included 385MW of battery storage and 85MW from pumped hydro. 

In a webinar hosted by Current± this week on the impact of the ongoing energy crisis on Capacity Market dynamics, EnAppSys’ Paul Verill said that the crisis’ supply crunch is contributing to record prices, but in turn the CM’s design could be argued to be exacerbating tight capacity margins. 

1.1GW of battery storage wins Italy contracts

In Italy this week, grid operator Terna awarded 34.1GW of capacity market contracts to existing assets, 3.8GW to new assets and 3.6GW to so-called ‘virtual assets’. Awards to new-build energy storage facilities made up 1.1GW of that new-build capacity, with 300MW already authorised plants which cleared at a price of €70 (US$78.47)/MW/yr and 800MW of unauthorised plants cleared at lower tariffs. 500MW of that energy storage will be on the southern island of Sardinia. 

Additional reporting for Energy-Storage.news by Andy Colthorpe.

The UK portions of this story originally appeared as separate items covering the UK Capacity Market on Current±.

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There should be an ‘all of the above’ approach to energy storage deployment, the panellists said. Image: Invinity Energy Systems via Twitter.

Although different energy storage technologies are often thought of as in competition with each other, it’s a case of all-hands-on-deck if we are to achieve deployment targets.

Speakers on Energy Storage Summit 2022’s ‘Increasing Capacities and Generation’ panel unanimously agreed with that premise, at the event hosted in London this week by our publisher Solar Media.

Katherine Vinnicombe, head of business development at UK grid-scale energy storage developer Eelpower, said: “There is a consensus forming that we need another 40GW of storage by 2035 in the UK which is really significant. That will be divided 50:50 between short-term needs like frequency response etc while the other half is needed to target long-term solutions. 

“The big question is, what do we need to do in the market today to stimulate those solutions, which have quite different business cases to what we see in the market today?” 

Ed Porter, business development director at vanadium flow battery company Invinity Energy Systems, added: “There is not a conflict between different storage durations. The amount of storage we need means we need everyone in the space to deliver on all of their plans.” 

Vinnicombe, vehemently agreeing with this, added that the real bottleneck in the UK system is grid connections.

“We have a xGW pipeline but when you drill down to which ones have grid connection and planning consent is something like 10%. We need a collaboration between policymakers and other stakeholders to reach those gigawatt requirements,” she said. 

Staying on the topic of long ‘versus’ short duration, Peter Oldacre, VP global business development at Cellcube, another vanadium flow battery player, said that everything he is hearing from the investment community indicates lithium-ion battery prices will increase in future, not decrease as many are predicting. 

Separately, Jaime Vega, Managing Director at E22 Energy Storage Solutions — a provider of vanadium flow and lithium-ion storage solutions and part of the Gransolar Group — said that scale would allow long-duration to reduce its prices to be closer to short-duration batteries. 

At points the discussion moved onto more big-picture thinking around what long battery storage could potentially do, including capex deferral for transmission networks, which was mentioned by Oldacre. 

Porter highlighted a recent report by energy market analytics group Aurora Energy Research which said that long-duration energy storage could save 2.5% of the costs of managing the B6 boundary, which separates the transmission network at the SP Transmission and National Grid Transmission interface running roughly along the border between Scotland and England.

Aurora has modelled a wider system need for up to 24GW of long-duration storage in the UK if the country is to achieve net zero emissions by 2035.

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Contracted revenues can minimise lenders’ exposure to merchant risk, the audience heard. Image: Solar Media Events via Twitter.

A number of core challenges remain for lenders in the energy storage market, not least the relative nascency of it.

Speaking at the ‘Lenders’ Approach to Energy Storage‘ panel at the Energy Storage Summit 2022, Mark Cumbo director of renewables at Santander said when educating internally there was little real-life historic data available.

“I think a big challenge that we faced  in just educating internally is just a lack of historic revenue. We talked to the market advisors about can you do a back-casting and, and how would have actually performed in the last three or four years, and they do that but it’s not real world, it’s not real life,” Cumbo said at the event hosted in London this week by our publisher Solar Media.

A lack of historical data can also hamper the understanding of the lifecycle of a project, and impacting on the understanding of the asset value as well as the revenue streams.

“The useful life of projects, degradation and how batteries are developing and how we’re running longer hours, some lenders get a bit uncomfortable [with that], because we don’t have that historic data to prove where we are in the cycle,” said Jemma Couchman, partner at independent merchant bank Cameron Barney.

“And the different providers can provide forecasts and curves, but we’re still very early on, we don’t actually know and therefore, some people do get quite uncomfortable with that.”

Fundamentally the more certainty a developer can provide to a lender is key to securing financing, this includes a number of key parts including minimising merchant risk by securing a contracted revenue.

“The easier you can make it, the more attractive you’ll be. So bring me a floor if you can,” said Cumbo.

Beyond this there are other ways to increase security for lenders, said Jacob Lloyd, director at UK bank Natwest.

“Relevant experience across all sectors in space, there’s loads of impacting parts here. It’s making sure you have the right developers EPC contracts, the right battery supplier, the right optimiser,” he said.

The session closed with a consensus from that panel that lenders much be viewed as partners in the development of storage projects.

“Keep in mind that the lenders aren’t your enemy. They are on your side. We will have to work together to get it,” said Couchman.

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BayWa r.e. has completed the sale of the 266 MW DC (200 MW AC) Corazon I Solar plant and the 200 MW (400 MWh) Guajillo storage project to Eni New Energy US Inc. Located in Webb County, Texas, the Corazon I Solar plant began operations in August 2021, while the Guajillo storage project is expected to reach an operational stage before the end of 2023.

“We’re pleased to complete the sale of Corazon I and Guajillo assets to Eni New Energy US, a company that is well positioned to build upon the progress we have made and deliver clean, reliable energy to Texas,” says Fred Robinson, CEO of BayWa r.e. Solar Projects LLC. “We are also excited to partner with Eni to manage the plant operations of Corazon through our services business, BayWa r.e. Operations Services, LLC.”

“As we focus on our core strategies to grow our footprint in the U.S. market, this deal allows BayWa r.e. to reinvest capital in the company’s development pipeline across the country, including projects in ERCOT,” adds Robinson. “We’re excited to r.e.think energy and deliver progressive solutions into a rapidly growing market that will continue to thrive as we see the increasing implementation of utility-scale solar together with storage.”

BayWa r.e. acquired Corazon I as an early-stage project in 2019 and the project reached commercial operation in August of 2021. The company worked with the North American Development Bank, along with a syndicate of three other lenders, to sign a credit agreement for up to $216.1 million to finance the design, construction and operation of the Corazon I project.

BayWa r.e. partnered with local agencies on permitting and establishing a tax structure that will provide more than $30 million in tax revenue over the 35-year project life to support the local community. The electricity and renewable energy credits generated are being sold to a retail energy provider through a long-term power purchase agreement and in the wholesale electricity market.

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Scott Maloni, vice president of Poseidon Water (left) and Brian Probolsky, CEO of Orange County Power Authority, sign the MoU.

The Orange County Power Authority (OCPA) and Poseidon Water entered into a memorandum of understanding (MOU) to work together toward making the Huntington Beach Seawater Desalination Facility the first desalination plant in the western hemisphere to be powered entirely by renewable energy.

Poseidon’s proposed desalination project in Huntington Beach requires an average steady load of approximately 25 MW, which would make it one of the larger energy users in Orange County. The City of Huntington Beach, an OCPA member, recently voted to offer businesses and residents 100% renewable energy through OCPA. While the project is already guaranteed to have zero-carbon footprint through the state’s carbon offset program, being powered completely by renewable energy would further enhance the facility’s environmental sustainability.

“We’re proud to enter into this MOU with Poseidon Water today and are pleased to see they are dedicated to ensuring the water produced by this state-of-the-art desalination plant will be powered by solar, wind and other renewable sources,” says OCPA Chairman Mike Carroll.

“My fellow Huntington Beach City Council Members and I recently selected 100% renewable energy, through OCPA, as our default plan for customers – taking bold steps to address climate change,” states OCPA’s Board Member and Huntington Beach Mayor Pro Tem Mike Posey. “With this project located in Huntington Beach, I am happy to see that Poseidon Water has also committed to work toward making their project even more sustainable by working with OCPA in an effort to power the desalination plant entirely with renewable energy.”

In addition to this MOU, the project has enhanced its environmental protection by retrofitting its intake pipes to use wedge-wire screens to minimize marine life impacts. Also, Poseidon Water has committed to protecting and preserving the Bolsa Chica wetlands for the next generation.

“We set a precedent in 2010 by making our proposed Huntington Beach desalination project 100% carbon neutral through our voluntary Energy Minimization & Greenhouse Gas Reduction Plan,” comments Scott Maloni, Poseidon Water’s vice president. “However, it has always been our goal to have the project powered entirely by renewable energy if it were feasible to do so and with this MOU in partnership with the OCPA, we’ve shown our commitment to making that a reality.”

The MOU guarantees that OCPA and Poseidon Water will meet at least monthly to work toward a binding agreement to ensure the project can be powered entirely by renewable energy sources.

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Cross River Bank and Sunstone Credit Inc. are partnering to add a new asset class to Cross River’s lending portfolio. Cross River Digital Ventures has also made a strategic investment in Sunstone.

Sunstone has built a technology platform that provides solar developers with affordable, easy-to-understand financing products for their SMB customers looking to go solar. Through the partnership, Cross River will originate Sunstone loans and provide API connectivity to Sunstone’s platform, providing a streamlined, highly scalable solution that delivers an optimal customer experience for both borrowers and developers and supports Sunstone’s growth.

“We are excited to partner with Sunstone to enter a market where there is an opportunity to leverage our technology-based lending platform to provide energy efficient products to commercial borrowers,” says Adam Goller, EVP and head of fintech banking at Cross River. “Their experience, track record of success and product knowledge, combined with our technology and innovative approach to banking will address this high-potential market at the scale that the market has come to expect from Cross River.”

“We are thrilled to partner with Cross River as we embark on this next stage of growth for our company and the SMB solar market,” states Mike D’Andrade, co-founder and chief risk officer of Sunstone. “We have always been impressed with Cross River’s forward lean on matters of technology and sustainability, and it has been clear from the beginning that they understand and are just as motivated by our mission to democratize access to solar for businesses, which this partnership will enable us to do. In addition, we are excited that they have chosen to deepen their commitment to our company through the strategic investment made by Cross River Digital Ventures.”

Image: Photo by Jadon Kelly on Unsplash

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Silfab Solar Inc. has appointed Rob Jessen as CFO to replace Hanna Ayyad, who has been Silfab’s CFO since August 2014.

Jessen brings experience having been at Ernst & Young for 25 years becoming a senior partner and leader of EY’s Global Energy Sector. He previously served as a CFO and member of various boards of directors; more recently, he has contributed his extensive knowledge in a consulting capacity, working closely with the Silfab executive team on financial strategy and organizational structure. With his more than 30 years of consulting and executive management experience, Jessen’s focus will continue to be on strengthening the financial and accounting department for future growth and investment opportunities.

“Hanna has been an integral part of the Silfab story and growth over the last decade, having joined the company as one of its very first employees,” says Paolo Maccario, CEO of Silfab. “We want to thank Hanna for his dedication and contributions to Silfab’s success and wish him all the best on his next venture.”

Ayyad will continue to support and assist the Silfab executive team over the next few months to ensure a smooth and successful transition.

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Experts from the industry discuss the investment landscape for energy storage. Image: Solar Media Events via Twitter.

Although huge amounts of capital are being deployed into storage, some investors speaking at the Energy Storage Summit 2022 made it clear that the investment model is still set to evolve hugely. 

Jan Libicek, Investment Director at Bluefield Partners and Thomas McNicholas, Director at Greencoat Capital, both said they expected higher returns from storage than for other renewables, at a panel discussion on the second day of the sold-out event, hosted in London by our publisher Solar Media. 

Conrad Purcell, Partner at Haynes Boone said that the investment landscape for storage has become highly diversified and that he is seeing some really novel investment structures. 

“People are also looking for much higher levels of control over their investments, even with those developers who have long track records,” he added. “The market fundamentals are very different from renewable projects historically and there is also a much greater range of opportunities for sourcing capital, with so many pots of money available.” 

Karl Byrne, Vice President, BlackRock, similarly said: “There is no one size fits all approach to financing. We might build three robust models for a project and come up with different return forecasts. We consider things like: how wrapped is the engineering, procurement, and construction (EPC)? What is the construction risk?” 

Echoing what Purcell said about control, Byrne added: “We look at battery storage on an equity-only basis. We’d need more contracted revenues to bring in debt.” 

Gauri Kasbekar-Shah, MD, Head of Energy, Edmond de Rothschild, expanded on the additional value that large investment firms can bring: “We see ourselves as providing the flexibility in financial structure to allow the developer to capture all possible revenues with the storage asset. We are coming from a much better understanding of the asset class.” 

Battery storage at the frontier of investability

Jan Libicek, Investment Director, Bluefield Partners LLP, echoed what was said in other panel sessions at the Summit about the move from colocation to standalone storage assets: ”Two years ago it was a clear win for colocation but the focus is clearly now shifting to standalone storage, although colocation means you can save on the capex side.” 

In response to an audience question about aggregating multiple storage assets into one asset, he said it would be ‘fiddly’ for the investor but recent examples of this in solar meant it was feasible and, if done right, could actually be more attractive than a single asset of the same capacity. 

Another audience question related to earlier-stage storage technologies, to which Libicek said: “We’re looking at a few hydrogen projects in Europe but that’s a year or a few years away from being investable. Battery storage is for now the limit to where we’ll go.” 

Whie Purcell added: “What we find is that, where there is no track record which you can point to, there is an alternative approach. It works in other areas and involves having a large technology provider which can acquire or develop a new technology and can warrant that product to the buyer. That is bankable.”

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US Secretary of Energy Jennifer Granholm visiting Eos’ R&D facilities in New Jersey last year. Image: Eos via Twitter.

Eos Energy Enterprises has said that equipment and machinery will begin arriving next month as the zinc-based battery storage company expands its manufacturing facility near Pittsburgh, Pennsylvania, US. 

Eos had previously said it would triple the current production capacity of its plant in Turtle Creek, bringing it up to 800MWh of its Znyth brand aqueous zinc batteries. Znyth units offer up to three hours storage duration each but can be ‘stacked’ to create storage systems with up to 12 hours storage and discharge duration at full power. 

The manufacturer will add an extra 46,000 square feet of factory space and hire at least 125 new employees, it said yesterday. The land has been rented on a five-year lease from the Regional Industrial Development Corporation of Southwestern Pennsylvania.

Equipment is expected to arrive in March and the site expansion could be completed as early as this September, Eos claimed.

“We’re bringing quality green jobs to the region and building a renewable energy hub in the middle of coal country,” Eos CEO Joe Mastrangelo said.

Eos has already ramped up production from 65MWh annual capacity in 2020 to 260MWh last year. The third iteration of its battery systems is expected to begin performance testing this quarter and in December Eos secured a supply deal for high purity zinc-bromide — a key component of the batteries’ electrolyte — with chemicals group TETRA Technologies, from US-based sources. 

The battery maker listed on NASDAQ last year. It claimed US$137.4 million of customer orders had been booked during 2021 including its biggest single customer order yet, a 300MWh deal with EPC firm Blue Ridge Power. 

During 2021 Eos also received a US$100 million investment commitment from Koch Industries venture capital arm Koch Strategic Platforms, as well as a US$25 million equipment financing deal with debt and equipment financing company Trinity Capital, which the battery company said would go towards purchasing equipment for the Turtle Creek plant. 

Its manufacturing operations had been started up as a joint venture (JV) with nuclear industry technology company Holtec, but Eos bought out its partner to own the JV, called HI-POWER. The Turtle Creek plant is on a former nuclear equipment manufacturing facility site which was used by Westinghouse, one of Holtec’s partners. 

Eos is one of the founder members of the Long Duration Energy Storage Council, an international collaboration between energy storage companies, end-user customers and other stakeholders, which tech giants Google and Microsoft recently signed up to. 

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Representatives of NHOA, Solar Energy UK, Fluence and Trina Storage in the supply chain discussion panel, chaired by Robin Redfern of consultancy Everoze. Image: Solar Media Events via Twitter.

Pandemic-related supply chain issues for lithium battery materials hitting the energy storage space are just “bumps in the road” for the sector, and the supply chain will “come out stronger because of it,” according to panellists at the Energy Storage Summit 2022. 

Well-documented problems with the supply of lithium materials have meant that the price differential between lithium-ion phosphate batteries and NMC (nickel, manganese and cobalt) has closed, said Giuseppe Artizzu, CEO for the global business line energy storage at energy storage and e-mobility solutions provider NHOA (formerly Engie EPS). 

“No one would have predicted this a year ago,” he added, speaking during a discussion on the first day of the event held in London this week by our publisher Solar Media.

“The BESS market has grown faster than expected which is partially why these supply chain issues have arisen. But that challenge also represents an opportunity to grow. The supply chain will come out stronger because of it.” 

Chris Hewett, CEO of national trade association Solar Energy UK, was equally sanguine: “If the demand is there innovation and capital will follow. It may change the economics but fundamentally these are bumps in the road for BESS.” 

In a discussion on navigating these issues, Julian Jansen, EMEA region growth & market development director for Fluence, added: “Without scale you have no chance. BESS will only account for 4% of lithium-ion demand over 2021-2030, so if you don’t have scale within that you will not be making a dent in the market.” 

The discussion then moved on to the place for second-life batteries. Jansen and Hewett both said that second-life batteries would have a big role in the residential and commercial industrial (C&I) space but Jansen didn’t see them as a solution in the front-of-meter grid-scale sector, preferring recycling. 

“It’s too early to say whether secondary cells will solve the problem,” said Alicja Kowalewska, principal for energy storage at Gore Street Capital. “But the confidence needs to be there that there is a market for them in order for people to go and build solutions around second-life batteries.” 

Big picture drivers for localised supply chains

The question of second-life batteries provided a natural segway to discussing recent EU initiatives to increase supply chain transparency and encourage recycling of batteries, which can be seen as part of a wider policy shift to bring production closer to the West. 

Julian supported this principle: “We need to bring supply closer to markets where the product is being delivered and not ship absolutely everything from the Far East. That will also be beneficial for ESG requirements, especially in light of new EU regulations.”

Jae Choi, Head of North American Region, Trina Storage: ”Diversifying the battery technology is a must for energy storage.”

He sounded a note of caution about diversifying for the wrong reasons, however: “We are seeing inexperienced developers come from solar and wind to ESS who contract different parties for each for part of the value chain to keep costs down. But this is a problem when things go wrong because it can take a while to figure out exactly what went wrong. Suppliers might point the picture at each other which can ultimately delay the project.” 

Hewett added: ”Politically it is attractive to move the supply chain closer to home. We are early in the market and the UK is one of the fastest-movers on energy storage, so there is an opportunity to embed that supply chain here.” 

Jansen said that new project developments already point to this achievement: “Current pipeline projects show that by 2035, Europe will be 43% of lithium battery production, up from 15% today, though of course that will mostly be for electric vehicles.” 

Highlighting the EU’s push to increase the recycled component of batteries, he added: “You start creating a clear cycle of how the batteries are used, built, recycled and reused. That will be critical for the industry’s success and right now very few address all this. The way Northvolt addresses this move is incredible and pioneering and something we should all be looking at.”

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