06 Aug 2024 | 08:56 UTC

Shell signs seven-year tolling agreement for three-hour duration Hampshire battery

Highlights

BW ESS, Penso Power building Bramley battery

First long-term tolling deal for GB battery

Shell to trade asset in wholesale markets

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BW ESS and Penso Power have signed a seven-year tolling agreement with Shell Energy Europe for the in-construction 100-MW, 330-MWh Bramley Battery Energy Storage System in Hampshire, England, the two developers said Aug. 6.

The deal is the first announced long-term tolling agreement for a single battery storage asset in Great Britain, they said.

The fixed-price agreement creates "a template for a new revenue structure that will help to unlock energy storage market opportunities across Europe," BW ESS and Penso Power said.

Shell is to trade the Bramley asset into a range of ancillary services and wholesale markets, the developers said.

The asset is expected to be the longest duration BESS in the Great Britain market at the time of commissioning, expected in the fourth quarter of this year.

"The Bramley battery system is one of the most sophisticated longer-duration assets under construction in the UK and will provide us with unmatched capabilities for portfolio optimization," said Rupen Tanna, Head of Power and Systematic Trading at Shell Energy Europe.

The deal would help shift the battery market(opens in a new tab) away from short-term frequency response toward load shifting, said CEO of BW ESS Erik Stromso.

No price was put on the agreement.

Availability and cycles

The Bramely tolling agreement is based on availability of the asset and involves a fixed annual fee, payable on a monthly basis, Penso Power's CEO Richard Thwaites told S&P Global Commodity Insights.

"The obligations of Penso Power and BW ESS, as asset owners, under the agreement are matched back-to-back with the warranty provided by Sungrow," Thwaites said.

This was the first time Sungrow's PowerTitan 2.0 liquid cooled BESS had been deployed outside of China, he said.

The system packs 5 MWh of storage and integrated string inverters into a single 20-ft container, the 330-MWh project taking up no more space than Penso's 136-MWh Minety project in Wiltshire (also contracted to Shell).

"Improved energy density means the battery systems are much smaller now, it's a step change in terms of project footprint," Thwaites said.

With construction at Bramley advancing, site work is due to start before year-end at Hams Hall, Penso's 400-MW, 1,000-MWh BESS in North Warwickshire, and at the 200-MW, 500-MWh Berkswell BESS in the West Midlands.

"Energization for both is scheduled for 2026," Thwaites said.

Neither have commercial agreements yet, but Thwaites acknowledged "there is a benefit from having a long-term agreement and pricing is competitive with what we see in the market."

All the projects are located to take advantage of local flexibility needs, and the possibility of locational pricing under a revised electricity market design "would be a net benefit," he said.

Actual delivered battery storage growth in the UK is still running far short of what is required to support Labour's ambitious 2030 renewables targets, said Glenn Rickson, head of short-term European electricity analysis at Commodity Insights.

"Curtailment of wind is already a growing issue and one that will be significantly compounded if the growth in renewables continues to outstrip the growth in low carbon flexibility to absorb it," he said. "Deals like this, targeted at greater interaction with wholesale markets for longer duration assets, are vital if the UK is to manage its power systems effectively as it looks to scale up the proportion of intermittent renewables in its generation mix."

Volatile spread

Falling wholesale power prices, a saturated ancillary service market and underutilized assets in the UK's Balancing Mechanism have created a tough environment for battery energy storage(opens in a new tab) operators in recent months.

Operational battery storage capacity in the UK has risen from 3.5 GW at end-2023 to 4.4 GW as of May, while the project pipeline has risen by two-thirds in the past year to 95.6 GW, according to trade body RenewableUK(opens in a new tab).

Platts, part of Commodity Insights, assessed the price of GB peak day-ahead power at GBP74.50/MWh ($94.87/MWh) on Aug. 5.

In July, the contract averaged GBP71.42/MWh versus a GB solar capture price of GBP68.33/MWh.

On strong wind days, however, the spread between the day-ahead peak power and solar capture price can widen dramatically.

On July 4, when wind accounted for over 55% of the GB generation mix, the solar capture price plummeted to GBP2.26/MWh versus a peak price of GBP77/MWh.


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