BESS in GB - Getting to 3 gigawatts with Wendel Hortop (Markets Lead @ Modo Energy)

Is it's just kind of reach this scale, which competes with other traditional forms of generation. Can you, like, put, figure on that? Like, what what are we talking about when we talk of the market. And what does that mean in the context of electricity in general in the UK?

We're basically saying, like, if all batteries were doing was keeping lights on. At any one time on average, they can keep the the lights on in about a tenth of all of Britain's homes. And also, I mean, if we look at that three gigawatt number, what's interesting is that that's pretty sort of globally leading. Is that what we've seen as being the main market for batteries so far?

The thing that makes battery is so good at this, and it's why they've kind of displaced all the other technologies, which we're providing the service, is that they can do it so quickly and so accurately.

Hello, everybody. Welcome back to another episode of Modo, the podcast.

We've got something a little bit different for you today. In this special episode, Neil is hosting, he's talking to our market's lead Wendell Halltop.

Neil and Wendell take a look at the build out so far. What batteries are doing in the markets, and what changes might we expect to see in the future as more capacity comes online. As always, if you are enjoying the podcast, please like and subscribe. It really means the world to us. And if you want to see more content from the MotoO team, follow us on LinkedIn.

Let's jump in Hi Wendell. For those who don't Wendall is Modo's very own market's lead. And today, I'm gonna be asking Wendell a few questions about the great British battery market and sort of what batteries do and the size of that market and what it might look like in future. But before we start, when will it might just be worth you introducing yourself and telling us a bit about what makes you qualified to talk about this topic in particular.

Yeah. Hi, Neil. Thanks for the introduction. See, I've been at, six Moto Market Lead for the last, like, eight, nine months, but before that was, so I've been working in the battery space.

Within what we'd call like an optimizer. Essentially, that's these companies that, have the software that controls battery storage.

That's a company called Open Energy. I was there for like four and a half years, which really has sort of spanned, I think, the growth of battery storage from what it was at that point, which was very small, which I think will come on to to where we are today, which is pretty significant in the realm of both the UK but also kinda go over there if we look at batch markets. And so, like, if we just dive into it, I often hear people say Britain's battery market is mature. What do people mean when they say that Britain's battery market is mature?

There's a few different sort of things that's referring to. I think the first is just that when we look at the scale of new battery project and now coming into the market. If you think about the size of them, they are like equivalent to other energy infrastructure. It's sort of now we're at like what we call hundreds of megawatt scale. So it's it's kind of we're seeing new batteries on the scale as you would build, say, a small gas plant. Or a small sort of other generation unit. So that's one way that market's matured is it's just kind of reach this scale which kind of competes with other traditional forms of generation.

I think, secondly, it's more like on the market side, on the regulation side, you know, what is set up today in the in the great British market compared to a lot of other markets, say, in Europe, batteries are recognized as a form of energy infrastructure. You can go and build a battery. You can trade it in the market. You can access all the other markets, which, so other generation can access. And so that's the second way in which it's a mature industry. Like, you can actually kind of have a battery which so competes with this other form of generation.

And I think Vine is just the kind of companies which are now kind of in the space. The companies that are investing in these assets and looking at these assets, you now have got kind of big energy majors that kind of more traditional kind of generation companies who are building renewables, building kind of sort of, energy infrastructure at scale. Now looking at battery storage as an investment opportunity. Cool. And so you talked about there a little bit the size of the market Can you, like, put a figure on that? Like, what what are we talking about when we talk about the size of the market? And what does that mean in the context of electricity in general in the UK?

Yeah. So quite recently, we've hit a sort of three gigawatts of grid scale battery storage capacity in the UK and that's talking about the kind of power that these things can actually contribute to the grid, not necessarily like the energy capacity behind them. It's it's probably about three and a half gigawatt hours of energy capacity. To put it down to context, sort of peak demand in the UK hit, well, in the great in great Britain hits about forty seven forty eight gigawatts but we've got average demands, which is probably more about thirty five gigawatts.

So it's it's now at pretty sizable level in comparison to the rest of the there's of the GB market, and the GP electricity system. So, like, just just thinking about those numbers. So, and and average time, were basically saying, like, if all batteries were doing was keeping lights on, at any one time on average, they can keep the the lights on in about a tenth of all of Britain's homes. Yeah.

So, I mean, if, yeah, if we if we look at, like, kind of peak, let's say like, winter, yeah, winter peak demands, then battery storage on its own during that, like, peak periods could provide, yeah, like, eight, ten percent. Of that consumption. Okay. And so so who's who's actually got us to to this stage, then who's been building these batteries, where where this where's this three gigawatts come from?

I think that's what's so interesting about battery storage in Greg Britain. I mean, if we look at sort of other markets worldwide who sort of roughly comparable. We've got that US and China really. In the US, a lot of it's been kind of much more established sort of companies who are building this building this technology, like, in California, they're building, like, you know, huge batteries in order to replace essentially like gas peaking plant.

But what we've seen in the UK is this kind of grow from a series of, what were very small batteries at the time in the scale, in the scheme of things.

So we're talking about things which are like one megawatt to five megawatts in size, whereas now the stuff going in is like a hundred megawatts. The companies who have been responsible for that have therefore kind of been able to follow, have sort of wanted to and being able to follow that growth because of that small scale we had originally, we've sort of seen a lot of what you would have thought would have been the more kind of traditional companies to be building and owning the there's a battery storage kind of weren't really that interested. Like, they could go and build a much bigger project, like, much bigger offshore wind farm. Of a much bigger soda farm or gas plant if they really wanted to.

So instead, we've seen a kind of lot more of It's it's more kind of private, like kind of very sophisticated, sort of companies who are like, specialists in battery storage and want to build this technology, want to own it, and see, like, the long term value of it. And also, I mean, if we look at that three gigawatt number, what's interesting is that that's pretty sort of globally leading. I think the only countries which have got more are probably China and the US, and they're obviously much, much bigger sort of, sort of countries with a lot, lot, like, larger electricity consumption that shows the generation that we have in UK. For size of the grid, we've got a kind of we've we've managed to do pretty well in terms of the the scale of battery storage.

So you've you've mentioned that the people who got us here and the organizations that got us here, almost like this kind of disruptive private equity firms not your incumbent big infrastructure builders and energy majors. Has there been, like, in order to get us to that huge, like, three gigawatt number, Has there been like a lot of government input? Are we seeing subsidies, policies that are friendly towards batteries? Is that how we've got here? No. And I think that's what's so impressive about what has happened in the UK is that essentially we've hit this level where we're now seeing batteries kind of compete with other incumbent generation and sort of essentially BSO infrastructure, without any sort of dedicated government support So there's not been any sort of specific subsidies aimed at battery storage or kind of storage in general.

So it's been a kind of done entirely based on what these companies are willing to sort of expect from the market. And that's very different to when we look at renewable generation, which has growing to such significant levels, but it's been done with kind of quite heavy backing from the government. Okay. You you touched on the markets there.

And, like, the first thing anyone says when you speak to them about battery energy storage, right, is that the sun does noise shine, wind doesn't always blow. So the idea is batteries will kinda take that excess energy when it's there, buy it cheap. And then when it's not there and prices are high, they'll resell it. So is that what we've seen as being the main market for batteries so far?

In short, no.

So most of what I've gotten enough to where we are today this is sort of essentially batteries competing for this thing called frequency response. And so that's just where they're helping keep the grid stable. It's these contracts they can go and get from National grid ESO, and so they're paid to provide this service to the grid. And they are, yeah, that has been the, by far, the biggest contribution to what batteries have sort of been looking to to do and looking to contribute and looking to earn revenues from.

And so you say frequency response, could you just tell us what frequency response is and kind of what makes batteries so suited to providing this service? So frequency of the grids has to be kind of maintained at fifty hertz in the UK. It can kind of drift gave away, and that's sort of natural naturally what happens when, so ifs of, the available generation on the grid start to exceed supply, we'll see frequency increase. And when the opposite happens, we'll see frequency fall, but it's very important in order for that to be kinda kept within this narrow band around fifty hertz.

And so what frequency response is doing is essentially it's just providing, like, the opposite action to, to whatever's putting pushing frequency in that direction. And the thing that makes batteries so good at this, and it's why they kind of massively just displaced all the other technologies, which we're providing the service is that they can do it so quickly and so accurately. Yeah. Compared to like any other kind of technologies out there, you know, frequency changes very, very quickly. And battery is able to respond to that in less than a second. And so, you know, if there's a, you know, it happens quite frequently, like an interconnector to Norway trips, and all of a sudden, they're one gig of batteries, like, kind of pick up that stack and, like, correct for that in planets in the grid. So far, that's kind of where batteries have earned most of their money is providing this frequency response and the the money the national grid has provided in those markets.

Is that still the case? And has that changed at all? And if it has, why? So the last few years been, probably quite interesting, to look at.

So I think, before last year, the industry was kind of getting ready to move away from frequency response. Everyone you talked to were saying like, yeah, they kind of any trading's the future or the balancing mechanism or these other markets which you can go into. But then the price of this kind of one of these contracts, this, sort of one of these speaking to us on contracts, essentially went through the roof, and so all batteries were wanted to kind of provide this service and were doing so for essentially the entirety of last year. And really that happened because the the demand for that service couldn't be met by what was available, from batteries that existed.

Now what we've seen happen since then is there's been a flood of sort of new capacity which has come in to market kind of, well, I think a lot of it with plans, but also accelerated in response to those really high prices. And now we've got the opposite. We've got kind of too much supply for what is for kind of the demand of that service. And so prices have really kind of collapsed.

They've fallen about ninety percent since. And so if batteries can no longer get what they were earning from kind of delivering that frequency response service, they're instead looking to other markets, and so so the kind of most common one would just be sort of like wholesale trading. And so that'd be buying it goes back to your example you started with. So buying energy when, say, demands low overnight or when it's really sunny during the middle of the day and selling this energy at the peak where prices are the highest and demand is highest.

And so is that is that had to lead to, like, a kind of shifting expectations and this idea of, like, If batteries are earning loads of money during this frequency response last year, and I think it's something like over a hundred and fifty thousand pounds per megawatt, annually for for batteries in Britain, and most of that, as you say, coming from frequency response, has the idea of success changed as the definition of success for batteries commercially changed. I think that, you know, those involved in the industry, those who are building these batteries, they should be looking at what like, you know, what the the market as it is today is what they were probably expecting to see when they built those batteries and where they when they agreed to all those batteries, what happened last year was kind of just a really unexpected sort of boom for the industry, but, you know, I companies shouldn't have been looking at that as like a reliable long term benchmark for what they could earn.

And I think really where we are now is back where we were, back before that started. So if we go back kind of three years, we're now at compatible levels again in terms of what you can actually earn with a battery. And that's and that's still good. Right?

Like, if we look at, like, I assume it's still good anyway, because we look at, like, the pipeline of the amount of people who are attempting to build big batteries right now, These people, if they're not they're not getting government subsidies for it, really. So they must be looking at the market and going, this is still good. Yeah. And I think I think that's what yeah.

It's definitely the case. You know, we've got a sort of huge pipeline of new batteries, which are trying to kind of come online as quickly as possible.

You know, every sort of week we're seeing had a new battery come online, sort of fifty megawatts, one hundred megawatts in scale. And I think, yeah, really it's because they look at, they can look at the market where it was today and sort fundamentals of that, and they see that they they they can kind of generate value from that for the duration of the project. I think the other thing that's important about battery storage, which, we saw in kind of late twenty twenty one is that the kind of outside list we can see with some of the markets we would expect kind of energy markets in general to get more volatile as we kind of go through this net zero transition. So as renewable generation kind of picks up in capacity as of the old sort of thermal, so gas, gas powered, or coal powered generation kind of retires we will naturally see swings in the kind of wholesale market increase.

And so back at the end of twenty twenty one, we saw kind of a period of low end, which coincided with kind of low availability from, say, nuclear, and prices just went through the roof and, some batteries could make back a big portion of their expected revenues just in say a week or two weeks, and that's operating in the wholesale market. That's not kind of providing frequent serious I think a lot of the companies are investing, they they like kind of where sort of where they see a sort of baseline of revenues, but the thing that kind of makes them interested in the space I think is really the fact that, you know, things can get a lot higher quite quickly the fundamentals which are gonna cause that are probably just gonna make it more and more likely to happen as we go forwards.

Well, yeah. It's not that thing. I think I saw a statistic. And it's it's not written, but in Texas, ninety nine percent battery revenues were made in, like, on the in fifty days.

Right? Because because of exactly that, though, you on certain days, you get those spreads, and that's really where batteries could are really well placed. As a technology class to kinda take advantage. But anyway, where do you see the markets going?

What do you see as the future for batteries in Great Britain. So I think frequency response is still gonna play a big part. The, you know, it it's it it there's always gonna be a requirement for that from the from National Grid, sort of probably about one to two gigawatts. But the thing is, yeah, we're now three gigawatts of battery storage, we're gonna get to four gigawatts, maybe by the end of the year, ten gigawatts buys of twenty twenty eighth, twenty twenty seven, twenty twenty eight.

What is the rest of that battery batteries aren't gonna be doing because it's not gonna be doing frequency response. And so I think just the way that batteries operate in kind of wholesale markets, the way they look to trade energy, it's naturally gonna evolve. I think as they spend more time sort of in those trading markets, you'll see sort of strategies looking more at trading within day, you'd hope that they would take more of a role in in the balancing mechanisms. So essentially helping the control room kind of sort of maintain the kind of ongoing stability of the system, but also there's kind of other markets, which we expect to see.

So there's a kind of few new products coming out into the, which, I think batteries will look to take part I mean, it all sounds very exciting and obviously it is right because otherwise the sort of, like, investment in the space that we're seeing wouldn't be happening What's your contrarian viewpoint on all of this that kinda goes against as the assumed logic that we we use it all the time in the motor office and and outside? Think for me it's that I think even for us, they're kind of in the industry, I think it's easy to, like, lose sight of how quickly things are kind of changing and evolving.

Kind of five years ago, batteries could not even, like, they couldn't participate in the balance of magnets, and they weren't recognized as a source of kind of generation you could trade with Whereas when you look at it now, you kind of take that for granted.

And so I think what that tells us is that things which we think are barriers in terms like maybe policy, you know, they can quickly change. And, I think once they do change, like, batteries got a long way that they can contribute to the grid. You are you are moved incredibly quickly, and the the pace only really seems to be picking up, to be honest. But is there any, like, cause for concern and and things we need to watch where, like, not everything's necessarily super rosy.

That's a good question. I think, you know, when we look at the pipeline that exists of sort of new batteries that people want to build. You know, you can see us there. You can see the appetites there.

I think what we're gonna start seeing more and more is, you know, this issue of connections come to the fore. So can you actually connect that to the grid? You know, I think that's a big focus, not to the industry, but much wider, like, how to even kind of how do we get the amount of new renewable capacity onto the grid that we need. And the other thing is I think, it's kind of just can we get the kit, get the equipment?

Are we gonna see the supply chain able to grow? Are we gonna see Great Britain still kind of be an attractive place supply to in comparison to say the US. So, you know, can you actually get these batteries on the ground? And I think we hope so And I think that's what that massive pipeline helps is as you know that there's gonna be a lot of demand for this going forward.

Yeah. It's sort of proof of concept. Right? No. It like, that's that's the point in people saying great bit assessment tool market.

We sort of proved the concept. And you would hope that what that means is that the supply chain remains relatively reliable.

But it's yet to be seen. And, yeah, as you said, there's competition elsewhere, and not just from other geographies, but electric vehicles and all sorts of other things. I think one thing that will help that is when we look at the scale of batteries that's going forward, so you know, they're getting bigger. We've had a hundred megawatt spat systems coming online, sort of over the last year or two.

But in a few years, there'll be two hundred megawatts, three hundred megawatts. Like, there's this one that just got announced, which is one gigawatt, wait to see when it actually kind of is built, but that scale of projects makes it much easier. It's gonna get over some of these barriers a gigawatt sounds absolutely crazy, right, when you think facts about that latent buzzer battery being six megawatts, and now we're talking about a hundred and fifty two hundred times bigger than that. So, yeah, absolutely in saying.

But anyway, thank you for taking the time to talk to us Wendell. It's been super insightful.

So yeah, thanks a lot. It's an