ESN: What did you think of the pricing of the winning projects?
Sam Wilkinson: Our analyst team did some preliminary work on what to expect. The final results were fractionally below what we thought they would be. There was a reasonable spread there too. One thing to remember is that the enhanced performance that this provides would allow the batteries to command a premium over the conventional gas-fired solutions that are providing frequency response as well.
ESN: How advanced do you think the winners will be with their procurement?
SW: I would imagine that as they are bidding in with prices, that they would already have provisionally selected technology suppliers to provide all the components and the systems. I’d be very surprised if they had gone ahead with pricing in the bid if that wasn't at least provisionally established.
The time frame looks relatively short considering the experience that we have so far building utility-scale storage projects. I think the biggest is 6MW at Leighton Buzzard and some of these projects are in the range of 40MW, that's a significantly larger project than we have ever tackled before. Given some of the uncertainties, it does look like a pretty aggressive time frame to get those projects completed in time for the contract start date. I would say that the winners will start moving quickly and they will be looking to get all the pieces in place as soon as possible so that they can allow the maximum amount of time for issues that may come later with, for example, siting, grid connection or permitting.
ESN: A second EFR tender round is widely expected, could that happen sooner rather than later given the interest in round one?
SW: To me it would follow that we would expect these projects to go into operation and get some preliminary feedback on how well they perform and how much they live up to the expectation placed on them, before they go ahead with a potentially larger tender. To me it would seem unusual to launch a second tender just because the first is so oversubscribed. There might be a huge appetite from the supply side but it would follow to me, that they would wait and see if there was demand from the grid side before they would confirm any more build out.
The 6MW 'Big Battery' project in Leighton Buzzard, the largest in the UK so far. Source: UKPN/Younicos
ESN: Do you expect the winners to hold on to the projects after completion?
SW: It's not impossible that the projects could change hands but I believe, in the short- to medium-term, that the owners would retain ownership. They will own the asset and use it to generate revenue from selling that [EFR] service to the National Grid.
ESN: Which battery technologies do you expect to win out?
SW: There are very few technical details available but I would be amazed if they are not Li-ion batteries. That is the technology to beat right now for battery-based frequency response. They are very good at high power situations; typically frequency response is in periods of 30 minutes or shorter and Li-ion is typically chosen because of its ability to respond extremely quickly and inject high amounts of power.
Globally the vast majority of frequency response is Li-ion, it’s fairly tried and tested and there is a high level of confidence in it.
What else was interesting about the results of the tender for you?
The winners were predominantly renewables EPCs and developers. That strengthens the link between the renewable industry and the battery industry. At the same time, there are three extremely established utilities there that have already got a lot of expertise in providing services like frequency response and they also have a lot of assets built out, and the fact that they can then site these batteries there at these existing grid connections, allows them to lower costs compared to building a site on a brand new piece of land and a grid connection just for that one battery project.
CompanyCapacity awarded (MW)Price (£ per MW per EFR/h)
Low Carbon (two projects)10 & 407.94 & 9.38
Source: National Grid
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