Sprawled across a field in north Wiltshire, dozens of large rectangular boxes on the outskirts of the village of Minety are the latest physical sign of the UK’s energy revolution.
Together, they form the biggest storage battery in Europe, providing 100MW of lithium-ion power to prevent blackouts and volatile costs caused by the country’s increasingly renewables-based energy system.
“We fully support the UK’s target of achieving a net-zero emissions society by 2050. Projects like this will enable that transition,” David Wells, vice-president of Shell Energy Europe, which is helping run the project, said last week.
Many more batteries like this will be needed as the country races to cut carbon emissions through measures including generating upwards of 75pc of power from renewable sources.
Relying on the patchy weather for electricity supply can be a problem when power supply and demand needs to be balanced second-by-second, keeping the National Grid at its required 50hz frequency.
Blackouts like those in August 2019, when power to trains, hospitals and more than 1m homes was briefly cut off, are the result if the balance is not kept.
Too much power is just as problematic as too little; wind farms are regularly paid to switch off during particularly gusty days to avoid overloading the grid.
Batteries can help manage some of those problems, storing excess power on windy and sunny days, ready to send it to the grid when generation is low. But there are concerns of a looming gap as the supply of renewable power grows much faster than the very early stage battery market.
Wind power is the UK’s leading source of renewable energy
“We need to get these assets onto the network as soon as possible, really, because these costs are starting to take off,” says James Basden, founder and director of battery developer Zenobe.
The opportunity for battery developers is huge. In modelling published last week, National Grid ESO, responsible for balancing Britain’s supply and demand, said it expects 43GW of electricity storage will be needed in 2050, compared to 3.5GW today.
Not all of that storage needs to be in the form of batteries, but it would help if a lot of it was. Some can jump into the system in less than 150 milliseconds, responding to sudden surges. National Grid expects small-scale batteries that can supply power for two to four hours to play a crucial role.
The UK has 16GW of battery storage capacity planned
That has encouraged several companies into the market, such as lithium-ion battery developer Zenobe and vanadium-flow battery developer Invinity Systems. Utilities giant EDF has also bought battery storage start-up Pivot Power.
The sector, however, remains small, with less than 2GW installed. It has not been seen as an easy investment case, particularly for smaller developers.
The Government has tried to promote wind and solar power by guaranteeing the amount developers will be paid for the electricity. Battery developers cannot qualify for those subsidy contracts and are reliant instead on less predictable and often short-term contracts with National Grid ESO, as well as trading power on the wholesale market.
In a note early this year, investment bank Stifel said revenue opportunities were “evolving” as National Grid’s need for the services changes. But it warned: “Ultimately, this all adds to the complexity inherent in the sector and why the investment case is not as straightforward as the high level picture would suggest.”
Matt Harper, chief commercial officer at Invinity, agrees the commercial models need to evolve. “The biggest inflection point in the solar industry was the development of 20-year purchase agreements,” he says. “If we could see that same level of reliability of revenue streams on the storage side, that would be a huge improvement.”
The market is becoming more welcoming. Changes to planning rules making batteries easier to build have helped give them an edge against other types of storage, such as pumped hydropower.
“When you look at the alternatives [to batteries], some of them can be quite complex,” says Rob Nickerson, electricity market modelling manager at National Grid ESO. “It’s a bit easier to bring battery projects forward.”
Costs of batteries have also come down, and the technology is improving. Between 2010 to 2018, battery cell costs fell 85pc from $1,160 (£839) /KWh to 176 $/KWh, according to Bloomberg Energy Finance. Battery costs are forecast to continue to fall between 20pc and 50pc over the next 10 years.
Battery costs have declined significantly
A few years ago, batteries tended to be bidding into the market to dispatch power for about half an hour at a time before they needed re-charging. Now one-hour and two-hour durations are more typical, says Nickerson.
Jonty Lovell, investment manager at Foresight Group, reportedly spoke at an industry conference in March of a noticeable “turning point” in the sector over the previous six to 12 months, “where economics have started to become more viable, certainly for equity investors”.
Revenues from trading the power from batteries, rather than National Grid ESO contracts, are also seen as a growing opportunity, given expected spikes and troughs in power prices as the system evolves.
UK battery investor Gresham House Energy Storage Fund said in its April annual results that it expects trading to dominate its earnings longer term, “as volatility increases due to rising renewable generation and less gas-fired generation”. Trading made up about 10pc of its £19m revenues last year.
Ben Guest, lead fund manager at Gresham, says he expects there to be a gap between need and supply of batteries in the short-term, but believes the market is on course to deliver longer term.
“We are going to see a huge amount of offshore wind onshore and solar and batteries will not curtail at a rate that’s going to avoid big increases in balancing costs,” he says. “But if you look over the next five to ten years, I think we are on our way.”