Utility Week

20 | MARCH 2022 | UTILITY WEEK Generation lowing a fault. The ESO says the requirement for this service is growing as the inertia of the electricity system – its resistance to sud- den changes in frequency – decreases due to the closure of synchronous thermal gen- erators with heavy turbines spinning in har- mony with the frequency of the power grid. A•er debuting in October 2020, Futyan says Dynamic Containment has quickly moved from being a "niche trial market" to "quite mainstream". He says it has also been very lucrative, with those that qualify consistently earning £17/MWh – the maximum allowed during normal market conditions – due to the ESO's requirements exceeding the available pool of batteries. "That's just given greater investor con- fidence that the returns are there," he says. "Those that have had operational storage assets have had a bit of a windfall from that, which generates some cash, which enables them to invest in more storage assets. All of that is driving high investor demand for this asset class." This is starting to change, with the price falling below the cap for the first time in November: "It used to be that the demand from grid was greater than what was installed so everybody just took the price cap, whereas now you're starting to see as new assets come on, it's breached that demand and therefore it's not always the maximum. It depends on the demand on the day, given what's happening with intermit- tent generation. "I think everyone is expecting that as more capacity joins, as it will within the next year without question, the price will come off because there won't be a shortage of supply." Futyan acknowledges that the ESO's appetite for frequency response does keep growing, so it may be a bit longer still before it is fully sated. But he says the huge pipeline of batteries means the market will eventually become saturated and focus will have to shi• towards wholesale arbitrage: "I think there's prob- ably a couple of gigawatts of grid demand for ancillary services for batteries and the cur- rent pipeline of batteries being developed is about 20GW. "I don't know how much of that's going to get built, but even if half of it gets built or a quarter of it, it will be way in excess of what the grid needs." He continues: "We expect more volatility from more wind and solar that brings up the wholesale price and the saturation of grid services brings down their value and then the two should equalise. What we expect to see is flipping between those two different options depending on where the optimum value in the market is at that time." Bigger installations One very noticeable trend in the battery mar- ket has been the growing size of installations. "We started off in 2014 with our first ones at 1MW and then we started doing 10-20MW and now in general investors are looking for 30MW-plus really," says Futyan. "Below that's a bit subscale for most of the investors we have who have big pools of capital they want to deploy." Futyan says the removal of the 50MW threshold for batteries to become subject to the "longer, more complex" NSIP planning regime has seen projects between 50 and 100MW become the new norm. Although a larger project has already been announced – Sembcorp's planned 360MW installation in Teesside – he expects most batteries to be no bigger than 100MW: "You don't particularly get economies of scale above that because you tend to have to connect at a higher connection voltage because the DNOs just don't have the capac- ity for much above 100MW, and then if you want to connect directly to the transmission network, you've got to wait four or five years to get your connection and you've got a very long planning process." There have also been moves towards to co-location with renewable generation, with Anesco itself installing batteries alongside its Clayhill development – the UK's first solar farm to be built without subsidies in 2017. Scottish Power has previously announced that most of its future renewable projects will combine at least two out of the three of wind, solar and storage. Futyan says there's "no question" that there are benefits to co-location, which he says can save money in development, plan- ning, connection and construction, and also allows optimisation across assets. But he says the "vast majority" of current projects are still standalone and he expects this to continue to be the case over the short term, for several reasons. "One is that there isn't currently a market signal to do that." Given the value of ancil- lary services, Futyan says it makes sense to focus on those above everything else, mean- ing there is little motivation to optimise across assets in the wholesale market. He says this will eventually change as the value of the wholesale market increases relative to ancillary services. "Reason number two is it's very difficult to find a suitable co-location site. For batter- ies what you need is both import and export connection at the large scale, which is very rare to find. And for solar what you need is a greater big plot of land as close as possible to a substation with capacity for export only." He says finding either of these is difficult enough but if you want both in the same place, "you've got to find two needles in the haystack right next to each other and that just makes it really hard as a developer. "I think it's going to be an enduring issue for greenfield but as we see assets come to end of life and you get to the repowering point for wind and solar farms, I think every project will take a look at it and ask if there is a co-location opportunity, and can we apply for additional import to add to our export." Tom Grimwood, news editor continued from p19 "I think this boom of build-out will continue" Mark Futyan

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