REG - Gresham House Energy - BESS portfolio revenue update

Gresham House Energy Storage FundAnnouncement

24/04/2024 07:00

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RNS Number : 7741L  Gresham House Energy Storage Fund  24 April 2024

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24 April 2024

 

Gresham House Energy Storage Fund plc

("GRID" or the "Company")

 

BESS portfolio revenue update

 

Following its recent trading update on 18 April 2024, Gresham House Energy
Storage Fund plc (LSE: GRID), the UK's largest fund investing in utility-scale
battery energy storage systems (BESS), is pleased to share a further
supplemental update on recent BESS portfolio revenue performance.

 

After a challenging start to the year for the BESS market, the Company has
seen a meaningful improvement in the revenues of its underlying BESS portfolio
from March 2024.

 

 Month              BESS portfolio revenue*                          Fully operational BESS portfolio revenue**

(unaudited and rounded to nearest £100/MW/yr)   (unaudited and rounded to nearest £100/MW/yr)
 January 2024       £40,000/MW/yr                                    £43,800/MW/yr
 February 2024      £37,100/MW/yr                                    £39,500/MW/yr
 March 2024         £47,400/MW/yr                                    £52,600/MW/yr
 1 - 15 April 2024  £71,100/MW/yr                                    £77,900/MW/yr

* BESS portfolio revenue includes all assets which were operational in the
period. This includes assets which were in construction, extended
commissioning and offline for augmentation works.

** Fully operational BESS portfolio category excludes assets in construction,
going through extended commissioning or offline for duration increase works
during the period in review. The assets excluded are West Didsbury, Arbroath,
Enderby and Nevendon.

 

Portfolio revenues include Capacity Market revenues and reflect an operational
portfolio with a weighted average duration of c.1.2 hours. The duration for
the operational portfolio is projected to increase to c.1.6 hours by the end
of 2024. Grendon, the portfolio's only operational 2-hour project currently,
has outperformed the other portfolio assets, as well as other 2-hour projects
in the market for which there is publicly available information, on a £ per
MW basis.

 

49% of the operational BESS portfolio is not registered in the Balancing
Mechanism (BM) today and has outperformed the BM registered portion of the
portfolio. Performance of non-BM assets is not publicly available and so does
not appear on market "leaderboards". BM registered assets have publicly
available information disclosed relating to BM trades (but not wholesale
market trades) which is published by Elexon.

 

The Manager believes that, in due course, the revenue opportunity in the BM
may be more attractive as reductions in previously mentioned 'skip rates' come
down as the Electricity System Operator's (ESO) Balancing Programme is
concluded. As such, the Manager will continue to monitor performance of its
non-BM and BM registered assets and may register more projects in the BM as
value emerges.

 

Revenues since 11 March 2024 have improved due to:

1)   The launch of Balancing Reserve (BR), a new reserve product which has
launched initially with a small volume of 400MW. Reserve requirements in Great
Britain are for several gigawatts (GW) every day and this level will grow as
renewable generation increases (as this drives up the volatility of supply).
As the ESO launches a new suite of reserve products through 2024, including
Quick Reserve (QR) in summer 2024, we expect to see the Reserve volume that
BESS can compete for increase.

2)   The ESO changing the '15-minute rule' for BESS, whereby the maximum
duration of any BESS trade in the BM was limited to 15 minutes, to a
'30-minute rule'. This change was required to deliver BR but is also leading
to a greater use of BESS assets, although to date it has not led to a
meaningful reduction in skip rates.

3)   Improvements in wholesale markets, driven largely by a return of
negative prices. This has led to increased trading spreads and the return of a
second cycle opportunity in most days. Flat daytime prices over the winter
mostly limited BESS assets to lower cycling. The rise of solar generation in
warmer months means negative prices in the middle of the day, as well as
overnight, creates two distinct trading cycles, in turn leading to improved
revenue opportunities. Negative prices occur when renewable generation needs
to be curtailed. Through mid-April 2024, GB has experienced more than three
times the number of negative prices than at the same point in any of the prior
four years. The trend of increasing negative prices is expected to continue as
renewable penetration increases.

 

In summary, merchant revenues are inherently volatile, and the portfolio will
experience periods of higher and lower revenues. The Company is pleased to see
the recovery in trading opportunity since March 2024 and is encouraged by the
progress being made by the ESO through its Balancing Programme to drive
further utilisation of BESS assets. Whilst recent revenue improvements are
promising, overall revenues remain below long-term third-party forecasts and
the Company anticipates further recovery as the ESO progresses through its
Balancing Programme in 2024 and 2025.

 

For further information, please contact:

 

 Gresham House New Energy               +44 (0) 20 3837 6270

 Ben Guest

 James Bustin

 Jefferies International Limited        +44 (0) 20 7029 8000

 Stuart Klein

 Gaudi Le Roux

 Harry Randall

 KL Communications                      gh@kl-communications.com (mailto:gh@kl-communications.com)

 Charles Gorman                         +44 (0) 20 3882 6644

 Charlotte Francis

 Effie Aye-Maung-Hider

 JTC (UK) Limited as Company Secretary  GHEnergyStorageCoSec@jtcgroup.com (mailto:GHEnergyStorageCoSec@jtcgroup.com)

 Christopher Gibbons                    +44 (0) 20 7409 0181

 

About the Company and the Manager:

Gresham House Energy Storage Fund plc seeks to provide investors with an
attractive and sustainable dividend over the long term by investing in a
diversified portfolio of utility-scale battery energy storage systems (known
as BESS) located in Great Britain and internationally. In addition, the
Company seeks to provide investors with the prospect of capital growth through
the re-investment of net cash generated in excess of the target dividend in
accordance with the Company's investment policy.

The Company targets an unlevered Net Asset Value total return of 8% per annum
and a levered Net Asset Value total return of 15% per annum, in each case
calculated net of the Company's costs and expenses.

Gresham House Asset Management Ltd is the FCA authorised operating business of
Gresham House Ltd, a specialist alternative asset manager. Gresham House is
committed to operating responsibly and sustainably, taking the long view in
delivering sustainable investment solutions.

www.greshamhouse.com (http://www.greshamhouse.com)

Definition of utility-scale battery energy storage systems (BESS)

Utility-scale battery energy storage systems (BESS) are the enabling
infrastructure that will support the continued growth of renewable energy
sources such as wind and solar, essential to the UK's stated target to reduce
carbon emissions. They store excess energy generated by renewable energy
sources and then release that stored energy back into the grid during peak
hours when there is increased demand.

 

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