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Equinor launches ERCOT projects totalling 220MWh, targets ‘higher end’ of 4-8% returns

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Norwegian oil and gas firm Equinor has launched its first US BESS projects via the 2022 acquisition of East Point Energy, with its trading arm Danske Commodities charged with ensuring project returns.

Equinor has given the go-ahead for East Point Energy to build two battery energy storage system (BESS) projects in the ERCOT, Texas market, its first since buying the developer-operator in June 2022.

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The two projects are the 10MW/20MWh Sunset Ridge BESS in Frio County, near San Antonio, and the 110MW/200MWh Citrus Flatts BESS in Cameron County, on the border with Mexico in the southwest.

Construction has already started on Sunset Ridge and will connect to the distribution network of non-profit utility South Texas Electric Cooperative (STEC) in the second half of 2024. Citrus Flatts meanwhile is expected to reach commercial operations on the network of American Electric Power (AEP) in early 2026.

Both will operate on a fully merchant basis with Equinor’s trading arm Danske Commodities providing optimisation services, meaning it will take charge of the BESS’ activity in the electricity market. Real base project returns are expected to be at the higher end of its guided range for renewables of 4-8%.

BESS projects in the ERCOT market typically operate on a merchant basis – without long-term contracted revenues – thanks to its highly lucrative ancillary service and energy trading opportunities. BESS earned more than US$3,000 per MW per day during Storm Heather in January thanks to over-forecast energy demand, according to market intelligence firm Modo Energy.

Some tolling options have started to emerge however, whereby trading and optimisation firms will pay project owners a fixed fee to play a BESS into the market – effectively renting the BESS from the owner, guaranteeing them a minimum income. Some developers have cited this as a major boost to deployments, like Available Power’s president, Ben Gregory, in an interview at the Energy Storage Summit USA last month (Premium access).

However, penetration of third-party optimisation in the ERCOT market is lower than in the UK, where basically all BESS projects are optimised by a separate company. Part of this is down to how lucrative the market is – currently at least, with market saturation expected – but also that many project owners in Texas have in-house energy trading expertise.

Citrus Flatts was acquired by Virginia-headquartered East Point Energy from developer Black Mountain Energy Storage (BMES), one of the most active BESS project developers in the ERCOT market.

Equinor is also a 45% owner of UK BESS developer Noriker Power following an investment in 2021 and brought its first project there online in January, as reported by our sister site Solar Power Portal.

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