REG - Gresham House Energy - Trading and Regulatory update

Gresham House Energy Storage FundAnnouncement

11/11/2024 07:00

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RNS Number : 6828L  Gresham House Energy Storage Fund  11 November 2024

11 November 2024

Gresham House Energy Storage Fund PLC

("GRID" or the "Company")

 

Trading and Regulatory update.

Full year portfolio revenues are expected to rise in 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 announce the following trading update.

 

Portfolio revenues and market update

 

The Manager is confident that operational portfolio revenues will rise in 2024
compared with 2023, having seen an improving trend since the low in Q1 2024,
as portfolio capacity grows and as revenue per MW rates recover. Revenue per
MW is rising due to improving market conditions as well as the ongoing
onboarding of projects contracted under the previously announced tolling
arrangements with Octopus Energy.

 

As previously reported, as of 30 June 2024, portfolio revenues in H1 2024 were
£17.9mn, down 12.8% compared with H1 2023. So far in H2 2024, portfolio
revenues for the four months through to the end of October were £15.9mn.
Therefore, portfolio revenues for the first 10 months of 2024 were £33.8mn.
Given the 2024 performance to date and the demonstrable improving revenue
trends in recent months, GRID expects full year portfolio revenues for 2024 to
outperform full year 2023 portfolio revenues (which were £38.7mn).

 

The ongoing drivers of revenue growth include:

-     Further growth in capacity, which recently reached 845MW / 1,207MWh
and is set to rise to 1,072MW /1,701MWh with the completion of the current
pipeline in construction.

-     Improving market fundamentals:

o  rising GB renewable generation capacity, creating greater supply
volatility.

o  increasing power demand as the demand for electric vehicles and
stabilising retail electricity prices drive modest growth; and

o  reduced excess supply as coal plants have now been retired.

-     An improving regulatory backdrop (see below)

 

Regulatory update

 

There are several important recent developments that the Manager believes
improve the outlook for GB BESS:

-     The National Energy System Operator's (NESO) commitment to
accelerate the improvement in dispatch rates in the Balancing Mechanism. This
was mentioned in NESO's announcement 1  (#_ftn1) of 16 October, available here
(https://www.neso.energy/news/our-commitment-improve-battery-dispatch-rates-balancing-mechanism)
, and in its plan for delivering Clean Power by 2030 (CP30) published 2 
(#_ftn2) on 5 November (available here
(https://www.neso.energy/news/our-clean-power-2030-advice-government) ). The
latter highlights the need for significant growth in renewable generation and
low carbon flexibility. It also emphasises NESO's commitment to a level
playing field between technologies, which the Manager has been campaigning for
since the summer of 2023. Lithium-ion BESS are the best commercial and
environmental solution for delivering this flexibility, with NESO forecasting
a requirement for 22GW of BESS by 2030.

 

-     More specifically and independent of the above, the Balancing
Programme, which is aimed at creating the level playing field for BESS, is
approaching two significant milestones. These comprise the launch of the Quick
Reserve service, offering GB BESS an additional revenue opportunity, by year
end and the implementation of technology, to allow energy data to be
automatically and continuously communicated by BESS to the control room, in
the new year. Both are expected to make BESS more dependable and visible to
the control room.

 

-     The focus by Government, since Labour came to power, on 'Clean Power
2030', i.e. a decarbonised grid by 2030, has focused the efforts of the
Department for Energy Security and Net Zero (DESNZ) and NESO on what is
deliverable by that date, being primarily renewables plus battery storage.

 

-     On 1 November, the UK Government published its response to the Long
Duration Energy Storage (LDES) consultation, to which the Manager responded,
recommending that a Cap and Floor structure be implemented. The Government has
now confirmed that Lithium-ion batteries will be included and eligible to
compete in the Cap and Floor arrangement. The Manager is pleased to see that
the Government's previous inexplicable recommendation to exclude BESS has now
been reversed. The Manager believes this change could see projects of 8 hours
duration or more become commercially attractive in due course. Further details
about the scheme are expected to be published by Ofgem and Government in 2025.

 

 

Ben Guest, Fund Manager of Gresham House Energy Storage Fund plc &
Managing Director of Gresham House New Energy, said:

 

"We are pleased to see revenues in GB improving as the natural volatility of
renewable generation rises, creating more opportunities for our assets in
wholesale markets. On top of this, we are seeing the benefit of our ongoing
capacity rollout and duration increases come through as we begin to capitalise
on the market's recovery.

 

"We also welcome the positive regulatory steps being taken as part of the
Government's focus on decarbonising the electricity system by 2030. This is
moving the focus to immediately deployable technologies and hence onto the
benefits BESS can offer the whole system today.

 

"As Great Britain's reliance on renewable generation increases the
requirements for storage increase significantly, both for short duration and
longer duration. Lithium-ion is now the most competitive technology, in terms
of cost and round-trip efficiency, at any duration up to at least 10 hours and
will become increasingly competitive at longer durations as battery prices
fall further."

 

 

Capital Markets Day Update

 

Fund Manager, Ben Guest will set out the framework for the Company's
three-year plan through 2027, including indicative targets for MW and MWh
capacity, revenues, and EBITDA at the Capital Markets Day on Wednesday 27
November, 2.00-4.00pm (GMT). Please register to attend here
(https://greshamhouse.connectid.cloud/register) .

 

 

 

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

                                         GHEnergyStorageCoSec@jtcgroup.com (mailto:GHEnergyStorageCoSec@jtcgroup.com)

                                       +44 (0)20 7409 0181
 JTC (UK) Limited as Company Secretary

 Christopher Gibbons

 

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 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.

 

http://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.

 1  (#_ftnref1)
https://www.neso.energy/news/our-commitment-improve-battery-dispatch-rates-balancing-mechanism
(https://www.neso.energy/news/our-commitment-improve-battery-dispatch-rates-balancing-mechanism)

 2  (#_ftnref2)
https://www.neso.energy/news/our-clean-power-2030-advice-government
(https://www.neso.energy/news/our-clean-power-2030-advice-government)

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