Recharge A/S, an investment fund specialising in renewables, will take a 50.1% stake in a €24 million (US$26.7 million) micro grid on a remote Portuguese island that could prove the validity of such projects as an asset class.
System integrator and developer Younicos announced today that Copenhagen-headquartered Recharge has chosen to back the project on the Portuguese island of Graciosa, which is expected to reduce fossil fuel usage on the island by at least two-thirds.
The island, heavily dependent on polluting and expensive diesel fuel at present, will still require the fossil fuel source for some of its back-up generation. However, by installing around 1MW of PV and 4.5MW of wind power combined with a 3.2MWh lithium-ion battery park, the grid-balancing ‘must-run’ function of the thermal generation can be replaced almost completely, Younicos spokesman Philip Hiersemenzel told Energy Storage News this morning.
In addition, it is hoped the compelling economics of replacing the heavy use of diesel on the island will give the project some replicability to other parts of the world.
Project company Graciolica has signed a power purchase agreement (PPA) with a local utility, EDA, which has been approved by the regional regulator, with the savings on fossil fuel providing returns to the investor and reductions in energy costs for Portuguese end consumers.
Recently appointed Younicos CEO Stephen L Prince hailed the positive economic, as well as environmental impact of the project.
“Our technology allows us to use as many renewables as is economically optimal,” Prince said.
“This is not only drastically reducing CO2 emissions, but also lowering energy costs, since we are replacing expensive imported diesel fuel through locally produced renewable energy”.
Converging economics of island micro grids
Younicos spokesman Hiersemenzel said, partly due to macro-economic conditions such as the Euro-crisis, that the project took a while to develop from the first signing of a Letter of Intent in 2010, before breaking ground in October 2014 and starting up work shortly after that, as Younicos and battery provider Leclanché signed a partnership. However, impact investors such as Recharge are becoming more comfortable with the technologies involved and their validity, the waves in the region caused by Spain’s recent, sorely anti-renewables policies have died down somewhat and macroeconomic conditions around Portugal and the Euro-zone have eased.
Additionally, while the global price of oil has plummeted at the moment, Hiersemenzel cited a recent PhD thesis by Philip Blechinger of the Reiner Lemoine Institute, Berlin. According to Blechinger’s study which looked at Grenada, the drop in price by approximately half has a much lesser impact on remote and island regions, equating to only around a 20% fall in real in terms to areas that are heavily dependent on imported fuels, particularly diesel.
“It’s a bit of a fashionable word to use, but we think this project can disrupt the way people view micro-grids,” Hiersemenzel said.
Essentially, the project’s use of utility-scale renewables and batteries to serve one remote community makes it a “grid-forming clean energy system”, the spokesman said.
“This project marks the first time a megawatt-scale power system is being stabilised using batteries – without the need for thermal generators. We’re excited to be deploying our battery-based energy storage solutions for this pioneering project,” Anil Svrivasta, CEO of Leclanché, said.
At this stage, the PV has been completed and the software to balance all the different components has been tested and is ready to go, he said.
“The business model pioneered here makes the financing of the changeover to renewables an attractive investment that can be replicated wherever power is generated by expensive imported fuel,” Recharge A/S director and co-founder Scott Macaw said.
At last year's Energy Storage Europe conference, the International Renewable Energy Agency's roadmap for energy storage was launched, highlighting both the technical and economic viability of the combination of batteries – and other forms of storage – with renewables in remote and especially island locations. This year's edition of Energy Storage Europe takes place this week in Dusseldorf, Germany.
This article has been amended from its original form to reflect that the power purchase agreement with EDA was signed by project company Graciolica and not by Recharge and also to more accurately portray the timescale taken to develop the project.