SSE and Statkraft complete the first swap on a Modo Energy index
SSE and Statkraft complete the first swap on a Modo Energy index
SSE and Statkraft have completed the first financial swap on a Modo Energy index. Congratulations to both teams. They have given the battery energy storage industry another way to manage revenue risk, and a practical example of the new financial market developing around these assets.
We started Modo Energy because we always believed batteries would become essential electricity infrastructure. And that an industry building assets at scale would need ways to finance them through uncertain revenues. It would need counterparties willing to take the other side of that risk, and a benchmark they could agree to use.
What does the ME BESS GB index actually measure?
Modo Energy's Benchmarks track realised BESS revenue in Great Britain across multiple revenue streams, through the FCA-regulated ME BESS GB index family that this swap settles against.
Explore the GB benchmark →That conviction shaped what we built. Seeing SSE and Statkraft use our index in a swap is a proud moment for us.
The deal uses the ISDA framework and references our ME BESS GB (2H) Index, which measures the revenue performance of operational two-hour batteries in Great Britain. Statkraft bought the index; SSE sold it. Below their agreed strike level, Statkraft pays SSE. Above it, SSE pays Statkraft.
For SSE, the transaction fixes the index-linked revenue exposure on a portion of its battery capacity. Statkraft gains additional exposure to battery revenues within its portfolio. Both companies say they are comfortable taking either side of this type of transaction. Their positions reflect the exposure they want for this deal.
Gordon Bell, Managing Director of SSE Energy Markets, explains the significance:
“This transaction demonstrates the growing maturity of battery storage as an asset class and provides a new way to manage exposure to battery revenues.”
The art of origination, offtake, and risk - with SSE
The importance of a standardised battery energy storage revenue benchmark
A battery can earn money by moving electricity between hours, providing ancillary services and participating in the Balancing Mechanism. Capacity Market contracts can provide another source of income. Top-Bottom spread and virtual battery structures replicate wholesale trading, addressing part of the battery's revenue opportunity. The Modo Energy index targets the full revenue stack, giving counterparties a broader reference for a battery revenue hedge.
Individual assets will still perform differently from the index. Location, availability and optimisation matter. A hedge leaves that difference, known as basis risk, to manage. But it gives the market another choice about which risks to retain and which to transfer.
More predictable income can make a project easier to finance. A trader with a different portfolio may be willing to take the exposure the owner wants to reduce. A financial contract connects those two requirements.
Duncan Dale, Statkraft's Head of Origination for UK and Ireland, describes the owner's decision:
“These types of deals enable asset owners to effectively risk manage their assets by locking in a percentage of the output when prices are considered to be high.”
How battery optimisers make money - with Statkraft
The owner can choose how much exposure to hedge and when to agree a price. The index gives both sides a reference for settling that decision as revenues change.
How battery energy storage contracts and deals are evolving
We should want more of this. The energy transition needs capital from institutions that must explain how they expect to be repaid. Giving them better ways to understand and manage battery revenues helps make that investment possible.
The industry has already been developing those tools. Gresham House and Octopus Energy announced a battery tolling agreement in 2024. Revenue floors and other swap structures have followed. Each contract puts a different share of the risk with the party prepared to manage it.
Battery tolling agreements: How do they work?
How a tolling agreement differs from other route-to-market contracts, explained through the June 2024 Gresham House and Octopus Energy deal. Read more →
Modo Energy has helped customers evaluate those choices. Gresham House describes using our benchmarks and forecasts to assess tolling offers, comparing its portfolio performance and forward revenue expectations with the terms on the table. That is the kind of work we built the business to support.
How the UK's largest listed battery fund values its assets using Modo Energy
How Gresham House uses Modo Energy benchmarks and forecasts to value its portfolio and assess the offers on the table. Read the case study →
We know from conversations with customers and users across the industry that this goes further. Asset owners and investors have been using Modo Energy benchmarks in negotiations with optimisers and traders for some time. They tell us our indices are written into contract clauses, giving both sides an agreed reference for battery revenue performance.
Want to use Modo Energy indices in your contracts?
Talk through how Modo Energy indices and benchmarks can fit into your contract structures. Book a call with our team to start the conversation.
Book a call →For these businesses, Modo Energy has become the industry standard for benchmarking what batteries earn across multiple revenue streams. That trust has been built through use in commercial decisions. Seeing SSE and Statkraft settle a financial swap against our index is a natural next step, and further validation of a benchmark the industry already relies on.
Why indices and benchmarks are necessary for any investable asset class
Established financial institutions need a basis for judging the investments they make. A pension fund's investment committee needs to assess its managers against an agreed measure of performance. CFA Institute's guidance recommends identifying a performance benchmark for each eligible asset class within an institutional investment policy. That makes the benchmark part of how capital is governed. [CFA Institute's institutional investment policy guidance.]
Take the S&P 500. It gives investors a recognised reference for US large-company equities. An investment committee can compare a manager's returns with that market, rather than judge them in isolation. The same index underpins funds and derivatives through which investors can take exposure. A shared definition of the market supports both accountability and investment products. [S&P Dow Jones Indices explains these uses.]
In oil, WTI provides a benchmark around which a futures market operates. Participants can use those contracts to hedge price movements or take exposure to crude oil. The reference price connects the physical commodity with a financial market for managing its risk. [CME Group's WTI contract overview.]
Battery revenues need that kind of common reference. An investor should be able to examine whether an asset's performance reflects wider market conditions or something specific to that asset. A counterparty needs an agreed measure against which to settle a hedge. Without it, each negotiation has another basic question to resolve: whose calculation of battery revenues do we use?
Our index measures operating revenues; investors still need to assess project costs, debt and the price they pay for an asset. But a consistent revenue benchmark gives them a starting point they can scrutinise and use across transactions. I see that as essential work in making batteries easier for institutional capital to finance at scale.
We have spent years making battery economics easier to examine. Our research explains market changes. Our forecasts let customers test investment assumptions. Our benchmarks provide a consistent reference for revenue performance, with published methodologies that users can scrutinise.
Where could GB battery revenues go from here?
Modo Energy's Bankable Forecasts model GB battery revenues forward by location, size and commissioning date, with scenarios built to survive lender and credit-committee scrutiny.
See the GB forecast →Regulation adds to that foundation. Modo Energy (Benchmarking) Ltd is authorised and regulated by the Financial Conduct Authority under the UK Benchmarks Regulation. Our ME BESS GB Index Family sits within the regulatory framework used for major financial benchmarks. Building to that standard was a deliberate investment in the market we expected to emerge.
Modo Energy's BESS indices are now FCA-regulated
Modo Energy (Benchmarking) Ltd is authorised and regulated by the FCA under the UK Benchmarks Regulation. What the authorisation covers, and why it matters for using the index in financial contracts. Read more →
We want to help build a global standard for understanding and valuing energy assets. That requires independence, including publishing results that challenge an investment case. Customers need to be able to question the method and understand the answer before they commit capital.
Congratulations to SSE and Statkraft
SSE and Statkraft have taken that work a step further by trading on the index. Credit belongs to the people on both sides who agreed the terms and completed the transaction. Both are long-term users of Modo Energy's benchmarks and forecasts, and I am delighted to see them make this happen.
Dale expects further deals:
“That’s why we’re pleased to have completed the first battery index deal with SSE, which we see as the first of many.”
I expect more counterparties to follow. The demand for ways to manage battery revenue risk will continue as investment in the technology grows. Our job is to keep making that risk easier to understand and price, so the next deal is easier to do.
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