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29 November 2018

Encouraging signs for behind-the-meter battery market in the UK

Edward Crosthwaite Eyre

Edward Crosthwaite Eyre
Senior Manager, Energy utilities and resources

Today’s announcement by Arsenal F.C. of the successful commissioning of a battery storage system at the iconic Emirates Stadium marks an important milestone in the development of the behind-the-meter battery storage market in the UK. The 3MW/3.7MWh BSS, one of the largest at any sports ground in the world at present and the first at a UK football club, is the product of a unique partnership with pioneering developer, Pivot Power and financier, Downing LLP.

Third party funded batteries behind-the-meter can offer significant savings to commercial and industrial (C&I) hosts, as well as additional revenues from sale of services to National Grid. However, successful execution of these projects requires not just sound economics but also a workable and scalable commercial proposition.  In particular, developers and interested C&I customers need to address a number of core commercial challenges if this business model is to scale:

  • The first is ensuring sufficient flexibility in the commercial construct that enables the business model of the asset to evolve in response to the inevitable market and regulatory changes that could reduce or eliminate existing value pools for batteries and open up new ones.  We have already seen this in the last couple of years with batteries diversifying away from a reliance on non-energy costs savings and grid services to a more resilient revenue model involving accessing wholesale energy and balancing markets to generate arbitrage revenues. 
  • The second is ensuring that the project has access to key markets and value pools irrespective of the choice of retail tariff by the host. This is particularly pertinent to the question of wholesale energy and balancing market access, on which the economics of these projects rely.  Indeed, one of the most interesting aspects of the Emirates project was the development of a bespoke behind-the-meter market access and settlement solution with the site’s renewable energy supplier, Octopus Energy, that enabled the battery project to look through the supply tariff and gain full access to wholesale energy and balancing markets as if it were a standard front-of-the meter asset.
  • However, guaranteeing market access on day-one is only half the answer. The project must also ensure that, in the event that the host wishes to change its energy supplier to the site, it is able to replicate these market access arrangements with the incoming provider. This is a critical issue, as hosts will rightly resist any undue fetter on their future ability to switch.
What is interesting to note is that these challenges are not unique to the deployments of batteries – they apply to all flexible demand and generation assets that could potentially be deployed behind-the-meter to lower customer’s bills and provide services to a low carbon grid.  As such, these early behind-the-meter projects with C&I customers are potentially blazing a trail not just for batteries but for an entirely new breed of distributed flexible energy asset.