UK battery investor Gresham House Energy Storage Fund has announced that fourteen of its projects, totaling 568MW/920MWh, have secured fixed-price contracts with a subsidiary of Octopus Energy.
The agreement entails two-year fixed-price contracts for approximately half of the company's 1072MW target portfolio, commencing in phases from July 1, 2024, according to Gresham House.
Under these arrangements, Octopus Energy will pay a fixed fee per MW for the use of each project's batteries, excluding capacity market payments received separately by the projects.
Gresham House anticipates annual contracted revenues of around £43 million during the tolling arrangement, inclusive of capacity market revenues, which are predominantly index-linked to CPI for 15 years.
The agreement is expected to provide stability to the Fund's revenues and enhance certainty over its cash flows, while also ensuring a higher price than the earlier performance at the start of the year, Gresham House noted.
Following this agreement, Gresham House anticipates that approximately 50% of its portfolio will be hedged by the end of 2024, with a portion of the portfolio continuing to operate under existing optimization agreements.
Kieron Stopforth, head of flexibility at Octopus Energy, emphasized the importance of batteries in creating a flexible and cost-effective energy system, stating, “Through this landmark deal with Gresham House, we're not only increasing the size of our virtual power plant to over 1.5GW, we're also unlocking the power of flexibility to drive down costs for consumers across the country.”
John Leggate, chair of Gresham House Energy Storage Fund, highlighted the benefits of the contractual arrangements in mitigating risks and delivering superior returns to shareholders, particularly in an uncertain revenue environment.
