It’s been five years since Great Britain’s first battery energy storage listed fund - Gore Street Energy Storage Fund - began publicly trading.
Since then, two more listed funds focused on battery energy storage ownership have launched in Britain: Gresham House Energy Storage Fund, and Harmony Energy Income Trust.
As some of the biggest, most influential names in the battery world, we thought we’d take a closer look at all three. So, how do their portfolios stack up? What are their respective (current and future) strategies? And where have their revenues come from?
Read our previous piece on the UK’s listed battery energy storage funds here.
Battery energy storage fund overview
As of right now, how are these funds getting on?
- Gore Street Energy Storage Fund is the oldest fund, having started trading in May 2018. It is the only fund with capacity currently operating outside of Great Britain - with assets in Germany, Ireland, and the US.
- Gresham House Energy Storage Fund is also nearing five years of public operations - it started trading in November 2018. It is the largest of the three funds, both by operational capacity and market capitalization.
- Harmony Energy Income Trust is the newest fund - it started trading in November 2021. Its first system became operational at the end of 2022, the 98 MW Pillswood battery.
- All three funds seek to deliver dividends to shareholders on a quarterly basis.
- The combined market capitalization of the three funds now exceeds £1.5bn.
Fund performance
Let’s take a look at total investor returns from each fund since inception (including dividends).
We have also included a combined battery fund index tracker (in black) - this is the average return weighted against the market capitalization of each fund.
This combined battery fund index would have performed well against the FTSE All-Share (including dividends) since inception.
- Since May 2018, the combined battery fund index would have delivered annualized average returns of 10.6%. This beats the FTSE all-share average of 3.3%.
What do their portfolios look like?
Overall capacity
How much operational capacity (MW) do each of the funds have right now? And what are their future plans?
- Gresham House has had the largest growth to date - and its capacity is expected to grow by 3.3 times over the next three years.
- Gore Street has been focusing on growing internationally - but its first new capacity in Great Britain since 2020 is due online this year. Gore Street’s portfolio is expected to grow by 3.6 times by the end of 2026.
- Harmony Energy is expecting to grow its portfolio by 4.5 times by the end of 2026.
Asset location
Each of these funds built their initial portfolios in Great Britain - but investment in other markets is starting to grow. However, the three funds have different strategies when it comes to international expansion.
- Gore Street are the only fund to have expanded internationally so far - and the majority of their operational capacity now sits outside of Great Britain.
- By the end of 2024, the US will be their second-largest market - with capacity due in Texas (145 MW) and California (200 MW).
- Gresham House has the biggest pipeline in Great Britain - and has just two international systems in its pipeline. Monvalet and Monvalet 2 (Republic of Ireland) will total 300 MW, and should be completed by the end of 2025.
- Harmony Energy is currently focused solely on the Great British market.
System duration
Alongside location and battery size (MW), asset duration is another major factor that these funds have to consider.
- To date, Gresham House batteries have an average duration roughly in-line with the rest of the nation’s fleet. In contrast, Gore Street’s batteries have a shorter duration than average (in Britain, anyway), and Harmony Energy’s batteries have a longer duration than average.
- The duration of Gore Street’s overall portfolio differs significantly according to region. Its US systems all have two-hour durations; in Ireland, the average duration of its batteries is around 30 minutes. This is driven by the different revenue opportunities and operational strategies in each region.
Duration of planned pipeline
The average duration of grid-scale battery energy storage systems in Great Britain is currently 1.2 hours. However, durations are getting longer.
In our buildout report (here), we highlighted how the majority of capacity coming over the next three years will be longer-duration systems.
- All the funds will be adding two-hour batteries to their portfolio over the next three years. This reflects a trend across the entire fleet.
- Harmony Energy’s current portfolio is entirely made up of two-hour assets - and this will remain their strategy for the next three years (based on current plans).
- All of Gore Street’s British batteries have durations of one hour or less. In future, their capacity will be bolstered by two-hour systems - including the 200 MW Middleton battery (expected in 2026).
- Gresham House prefers to own batteries of varying durations.
Revenue and operational strategy
Who operates their assets?
- Gresham House has the most diverse operator list, but this is to be expected - it also has the most assets (19).
- Most of Gresham’s capacity (395 MW) is operated by either Arenko and Habitat.
- 70% of Gore Street’s capacity is operated by either EDF or Flexitricity.
- Harmony Energy’s batteries are currently optimized exclusively by Tesla - but they currently only have two assets.
- There is relatively little overlap between the three funds - only Flexitricity and Anesco currently optimize assets for more than one fund.
To BMU or not to BMU?
So, what percentage of the funds’ respective portfolios are Balancing Mechanism-registered?
- Both Harmony Energy batteries sites are Balancing Mechanism-registered.
- Gore Street and Gresham House have a higher percentage of non-BMUs than the rest of the fleet.
- Gore Street’s non-BMUs are older, sub-10 MW systems. These are contracted into frequency response services for the majority of the time.
- Gresham House’s non-BMUs include the newer 50 MW Wickham Market and 40 MW Stairfoot batteries. These systems have spent significant time outside contracted services - which could be a sign that they’re following a NIV-chasing strategy. Habitat Energy operates both systems.
Where do they earn their revenues?
So, where do the fund’s assets earn their revenues? And how does this compare with other batteries?
- In 2021, the dominance of Dynamic Containment led to Gore Street and Gresham House assets pursuing a revenue strategy much similar to the wider fleet.
- In 2022 this changed significantly. Both funds pivoted to a more FFR-heavy strategy - in response to the saturation of Dynamic Containment in late 2021. This could be a sign of a lower-risk revenue strategy.
- Harmony Energy’s assets follow a completely different revenue strategy. As two-hour systems, they have been able to charge up in the higher-throughout high-frequency Dynamic Regulation service, and export in the wholesale market.
How much do they cycle?
So, what does this mean in terms of cycling?
- Gore Street assets tend to cycle more than the rest of the fleet - but this is likely due to their shorter durations. (e.g. FFR requires higher cycling for shorter-duration systems.)
- Despite similar operational strategies, Gresham House assets have cycled less than Gore Street’s - due to their longer average durations.
- Despite being two-hour systems, Harmony Energy’s assets cycle even more than the other funds - because of their Dynamic Regulation/wholesale trading strategy.
Appendix
Disclaimer
This article does not constitute financial advice and Modo Energy Limited will not be held liable for any damages resulting directly or indirectly from decisions made based on the contents or views expressed within this report.
Sources
Fund information (NAV, portfolio size, share issuance, and market capitalization) is taken from the latest annual/interim reports and key information documents available (as of 31st May 2023). These documents can be found at the links provided below:
- Gore Street Energy Storage Fund plc
- Gresham House Energy Storage Fund plc
- Harmony Energy Income Trust plc
Closing price data for the above funds (and the FTSE All-Share) is taken from Google Finance, at the end of each trading day.