Utility Week

UTILITY WEEK | JULY 2021 | 33 in association with "Looking forward, that really changes over time. As you get more and more stor- age on the system, more and more revenues are coming from the wholesale market. And when you get into that world, you get very significant revenue synergies, because you have this trading relationship between the battery and the solar farms. "You can take advantage of price highs and price lows to charge your battery with the excess power, because it's all then in the wholesale trading market. So that is where the core financial driver comes from, if you have enough foresight to think about what the market will look like in 10 years' time." One participant said that co-location works well where the generation is serv- ing an industrial energy user, for example a water works, where there would be less time with surplus generation. "The co-location point is trying to find those consumers, typi- cally large industrials or people who have a predictable consumption pattern, and co- locating a technology where the resource is right for that and is economically attractive. "Things like battery tech, we've reached a stage where a battery might be expen- sive, but it doesn't need to do that much if you put it in an application where it's only just buffering small amounts. Then it's eco- nomic, today. And as the prices go down, it's more and more economic, and it opens up the market. "So it's not just a question of, 'can I put solar and wind plus batteries on a site?', it's also about finding the right places to put it, not just because the resource is there, but because the demand is there. That's what makes it economic." The economics of hydrogen Co-locating technologies to produce hydro- gen and thus use it as a mechanism for energy storage formed a key theme in the discussion. But the jury was out on just how big a role hydrogen would play. "In terms of co-location, it's all going to be about where is the oŠake? A large chunk of the cost of hydrogen is in transporta- tion, so you want a pipeline, or ideally you want to be right next door to the plant. The co-location there is co-location with a cus- tomer," was one comment. This, though, brought other issues to the fore – namely the difficulties of using hydrogen for heat. "There are funders who are keen on hydrogen, but they still want to see a busi- ness case, and they want to understand the policy and regulation behind it as well," remarked another guest. Denise Chevin, intelligence editor Summing up Paul Dight, Head of Renewables and principal partner in the utilities team, and Richard Goodfellow co-head of Energy and Utilities both at Addleshaw Goddard, participated in the discussion. Here is what they took away from it. C o-location seems to be the fashionable thing to do, but there needs to be a benefit to putting assets together instead of separately – for exam- ple, to make better use of a site's connection capacity. It is best to co-locate generation with demand, as this gets rid of the need to store surplus energy. The discussion moved on to look at the wider strategic view and how hybrid projects fit in to that. In the next 10-15 years there will be a complete 180 degree switch from a generation mindset (where we control supply to match demand) to a demand mindset (where intermittent generation is weather- dependent so we have to control demand to match supply). This will make the flexibility services that co-located storage can provide much more valuable. One panellist commented, "if there are no constraints on the system, you have over-invested". Storage is there to pick up the slack when there is excess renewable power. There was lively disagreement on the role of hydrogen in the whole energy system. Converting electricity to hydrogen and back again is an inefficient process. But when any technology starts out it will always be less reliable, less efficient and more expensive than existing systems, just as offshore wind and solar panels were 5-10 years ago. It will take a few hydrogen demonstrator projects at scale before the market unlocks for more complicated projects. Regulation can distort the market by boosting emerging technology, but mass decarbonisation needs to happen on a merchant basis: ie, de-risking the investment rather than relying on a subsidy. Funding models Unsurprisingly, it is not always easy to attract funders to hybrid projects. Different investors are o™en inter- ested in different technologies due to varying risk profiles, so it is not easy to get an investor to fund co- located technologies in one package. Addleshaw God- dard has a great deal of experience in successfully getting these deals off the ground and we were able to share our experience on how to de-risk the invest- ment and how to structure projects so that funders get comfortable and can understand the economics. Finally, looking to the future, we are seeing the democratisation of renewable energy investment with the emergence of crowdfunding. This will lead to a different investment risk appetite. The future could be for co-located assets where the economics and policy made sense of it and this was an exciting place to be. For more details: https://www.addleshawgoddard. com/en/ Battery storage, solar and hydrogen are some of the technologies being co-located alongside more traditional generation "You need to be absolutely clear of the benefits of co-location for any given project, and be able to articulate the case properly."

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