Gresham House Energy Storage Fund Signs Fixed Fee Agreement with Octopus Energy
Gresham House Energy Storage Fund plc (LSE: GRID), the UK's largest investment fund for utility-scale battery energy storage systems, is pleased to announce that 14 of its projects totalling 568MW/920MWh have been awarded fixed price contracts with Octopus Energy ( 'Octopus'), a subsidiary of the UK's largest electricity provider, which will offer attractively priced two-year fixed price contracts for approximately half of the Company's 1,072MW target portfolio in a phased approach from 1 July 2024 onwards.
Over the term of these agreements, Octopus will pay a fixed fee per MW for these projects in exchange for the use of each project's batteries. The fixed rate is determined by the duration of the asset in hours and excludes capacity market payments that the projects will continue to receive separately.
Including capacity market revenues from the company's entire portfolio, the majority of which is indexed to the CPI for 15 years, the company expects contractual revenues of approximately £43 million per year for the duration of the tolling agreement.
This contract provides the basis for GRID's revenues and provides a greater degree of certainty to the company's cash flows. For the portion of the portfolio signed with Octopus, the Company secured a higher price than its recent weak performance earlier in the year and potential battery economics at a competitive price.
Under the agreement, which gives Octopus time to take delivery of assets and GRID time to complete the construction and/or expansion of certain projects, the portfolio is expected to be approximately 50% hedged by the end of 2024: 568MW/920MWh of the target portfolio will be contracted under the agreement, while 504MW/776MWh will continue to be operated under the existing optimisation agreement.
These fixed price contracts will provide greater confidence that dividends will recommence at an appropriate stage in 2025.
Kieron Stopforth, Head of Flexibility at Octopus Energy, said:
"Every year we waste hundreds of gigawatt hours of clean energy because our systems are not flexible enough - not only that, but we have to pay for this senseless waste.
"Batteries play a key role in unlocking a clean and cheap energy system, storing green energy when it is plentiful and making it available to the grid when it is expensive.
'Through this landmark deal with GRID, we are not only scaling up our virtual power plant to over 1.5GW, but we are also unlocking the power of flexibility to reduce costs for consumers across the country.'
