The results of the National Grid’s Enhanced Frequency Response (EFR) tender published in August 2016 have come to be seen as something of a pivotal moment for the fortunes of energy storage in the UK – especially for battery technology.
The statistics will be familiar to many: 61 of the 64 EFR bids related to the use of battery storage, offering over 4311MW of capacity, and battery solutions dominated the 200MW of capacity accepted by theNational Grid. “Battery storage” and “energy storage” are used increasingly interchangeably.
One successful bidder (and the only bidder to be awarded two EFR contracts) was Low Carbon, which was awarded contracts for 50MW of capacity. On 1 March 2017, Low Carbon announced that it was forming a joint venture – VLC Energy – to exploit the commercial opportunity presented by EFR contracts.
The announcement catches the eye because Low Carbon’s joint venture partner, VPI Immingham, is owned by the oil trading giant Vitol group. In addition to battery storage dominating the EFR tender and commercially “coming of age”, was this also the moment when the business case of a “green and clean” project became commercially viable without Government subsidy?
Of course, Vitol is not alone when it comes to oil companies investing in renewables. Statoil, Royal Dutch Shell, Total and Aramco each announced the making of investments in the renewable energy market in 2016. Total is reported to have acquired a 90% stake in battery designer Safte Group, building on earlier acquisitions in the solar sub-sector.
These investments are significant, but represent only 2% of net operating income for Statoil, Royal Dutch Shell and Total. Aramco’s CEO said recently that oil and gas will continue to play a significant role in the future energy mix for decades to come. Oil remains the staple product of core business of these energy giants.
The investments in batteries and battery projects do however demonstrate that project sponsors are developing business cases which are credible investments in their own right, or at least worthy of early adopter speculative investment. Evidence of early adopter behaviour is positive as it suggests there is optimism that there will be a market in the near to medium term.
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