Octopus Energy has signed a two-year fixed-price tolling agreement with Gresham House Energy Storage Fund for 500MW of its battery assets, bringing the utility’s virtual power plant (VPP) portfolio to over 1.5GW.
Fund manager Gresham House announced the two-year fixed price contract with Octopus yesterday (5 June), which covers 568MW/920MWh of its UK battery energy storage system (BESS) assets, half of its long-term target portfolio of 1,072MW.
Octopus Energy will use the BESS projects’ batteries at a price determined by the duration of the assets – expressed in hours – though it excludes Capacity Market payments the projects will receive separately.
Kieran Stopforth, head of flexibility for Octopus Energy, said: “Through this landmark deal with GRID 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.”
The deal is likely to be the first such tolling arrangement in the UK BESS market, certainly the first of its size, with the vast majority of projects deriving most revenues from merchant opportunities like ancillary services and energy trading via National Grid ESO’s various available markets. However, opportunities in the latter have saturated in the last 12-18 months leading to substantial revenue falls.
Discussing the contracts and alluding to what Octopus will use them for, Ben Guest, fund manager for GRID and MD of Gresham House New Energy, said: “They [the contracts] 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.”
Adding: “End consumers are increasingly demanding electricity that is both renewable and affordable, as well as reliable. Therefore, electricity suppliers increasingly need to balance intermittent, renewable supply with customer demand, for which batteries are well-suited.”
