Blackhillock - Europes largest battery with Tom Palmer (Head of Business Development- Network Infrastructure @ Zenobē)

Hello. It's Ed and welcome to another episode of Transmission. Today, we're joined by Tom Palmer. Tom is the head of business development at Zenobi in network infrastructure.

And Tom has over fifteen years of experience in the energy sector, and we're gonna spend today talking about how Zenobi think about battery storage. So should you be putting storage alongside generation, for example, in Scotland? How have things like skip rates impacted the investment outlook? And we're gonna front run some record breaking news for q one of twenty five.

What's really stuck with me from this episode is how the battery storage market has developed in phases. So going from focusing on frequency response services, going into wholesale markets and then, becoming more utilized within the balancing mechanism. Where will that go next? So do we go into further stability services or do we kind of look to more colocation with renewable assets?

I'd love to hear your thoughts in the comments and if you're enjoying transmission, please hit subscribe. Okay. Let's jump in. Hello, and welcome to another episode of Transmission Today.

We are joined by Tom from Zenobi. Tom, welcome.

Thank you very much. Nice to be here.

And I'll come to you straight away. So so who are you and who is Zenobi?

Yeah. So, my name is Tom Palmer. So I head up the business development team in Zenobi in the standalone storage.

We this sort of network infrastructure part of the business is effectively the battery storage focus.

We, my team, develop new batteries, storage solutions, focused on the business case, additional revenue streams that could those batteries can achieve. And that's, like, the role of the team. Obviously, Zenobia is focused on building out large scale grid storage, solutions.

We're focused on building out over one gigawatt of, large scale batteries in Scotland, to support the grid, but have, bigger aspirations, obviously, to develop more.

Okay. And just to frame this this conversation, so I think listeners to transmission will have heard two previous episodes from Zenobia. One, by Steven on on bus infrastructure, kind of early stage Zenobia. And I think we had Rob on more recently on Second Life Second Life Storage.

But we are obviously, within this conversation, mostly looking at storage assets, both within GB, and we might cover a little bit of ERCOT as well.

Yep. That was good. So yeah. So the the the Zenobia business is split into three elements. The one which is the bus infrastructure, and solutions.

The second is the network infrastructure, which is the grid scale storage.

And then finally, there's second life. So it's reutilizing those batteries from the buses, to basically use in mobile solutions, with those.

Okay. And let's let's now start with with, perhaps some topical news.

Black Killick, what's the latest on Black Black Killock?

So Black Killock is a two hundred megawatt storage project. So it's two hour duration located in between Aberdeen and Inverness, the Black Killock substation.

It's on a sort of vital part of the network between, where you've got the interconnection coming down from Shetland and Viking Wind Farm flowing. You've got the offshore wind coming in, and then obviously that flowing down south. So it is our largest project to date and effectively will be crucial to support network in Scotland.

Yeah. And I think it will also be the largest in GB. Right? So current largest is a hundred megawatts, two hundred megawatt hours, lakeside, which is near Drax. I think we'll see that being broken by Black Hillock.

Yeah. So it'll be the largest at that point in time.

Records are there to be broken, so I'm sure someone else will come along later. But Yeah. It will be the largest at that point.

But more importantly to us, it's also the first project that will be commercially providing grid forming solution. Okay. So it's got grid forming inverters, the first time those have been deployed commercially.

It has a stability contract with National Grid. So it's providing much more than, battery storage has provided to date. Okay.

And let's let's come back to the grid forming side in a second. I think just on just on the date. So to timestamp today with the ninth of Jan, I think this episode will be going live in early Feb. So what's the status of Black Killick?

So Black Killick has, gone through energization.

It's in the final stages of, commissioning.

The reason, that process, it takes a while to go through, effectively, you're trying to get through all the grid compliance, all the testing with the manufacturers, which is Voxeler, SMA on-site.

So it's a quite a time consuming process. But because this project is the first grid forming inverters, on the network commercially, it means there's extra testing required. It's different testing.

Base, National Grid is learning from the or sorry. NESO is learning from this, as well as, we are, and this will set a path for all future projects for their compliance of grid forming inverters.

Okay.

So, it takes a while to get through that process. Obviously, you have to go through tests doing full load ramping, partial, all those kind of things.

And then once that's all complete as well with the off taker and all the, software in place, then we go into full commercial operation. Okay. Black Hillock, two hundred megawatts, four hundred megawatt hours. What does what does it do? What's what what do where does the revenue come from?

So the revenue comes from, with any storage asset stacking across different revenue streams. So, obviously, that means wholesale market, trading energy there.

It also may involve bidding into system services, the balancing services. Sorry. So, frequency response, all these kind of things. But the the focus is really on the balancing mechanism.

So for us, being based in Scotland, there is locational value from the asset being able to import during high wind in Scotland and the current limitations on the network capacity. That mean that all that wind is unable to flow over the network from south down to, England and Wales where it is actually needed. So that's resulting in wind farms being turned off, and Black Elec is able to effectively import for the two hours, or longer at different, megawatt ratings, and effectively export that later. So it's able to stop you turning off wind, and provide a vital service to NESO as their own system operator.

Yeah.

I mean But there's also what's new about this is stacking additionally is the stability contract.

So providing reactive power, providing inertia, short circuit level that's vital to managing the grid when you've got such high renewable penetration and few thermal plants running in Scotland.

And and in terms of those additional contracts, so is it around reactive power, short circuit level? Those are the kind of those are the two that it's it's targeting.

And and inertia.

And synthetic inertia.

Synthetic inertia. So effectively, those grid forming inverters allow a significant change from, grid following inverters that are used on most storage projects today, effectively, and allows you to respond automatically on the reactive inertia requirements and provide extra stability on the network.

Yeah.

And that's really important when you've got all of the grid following inverters on renewable projects today in Scotland.

Yeah. And we this episode actually, I think, follows on from an episode we just released on synchronous, compensators where they provide kind of almost real inertia, so things that do physically spin. This is synthetic inertia, which is very similar but has a has a slight gap between the events and the response, time, which can be orders of milliseconds.

Yeah. We're talking milliseconds.

Like, it's it's having base technologies. Base can do the same things. The difference is, a synchronous, what you call it, condenser compensator is a debatable topic. But, effectively, with that, the primary service is providing inertia and short circuit and reactive power from those.

With batteries, it's not about providing one service. You are that Swiss army knife, which has probably been used a million times on this podcast, but, effectively, you're able to do that while trading active power. That's a very different, role, and it means you're not investing in one asset to provide a service. You have an asset that's capable of providing multiple services. Yeah. And, hopefully, that can be you know, as more gets tested, more gets rolled out, that should be lower cost to consumers. Yeah.

The the the critical thing is that you can pay for eighty, ninety percent of the asset through the wholesale trading, and you don't have to pay for the whole asset to to just get the the synthetic inertia type response. Exactly. Yeah. Okay.

And before we come back to the points around the location in Scotland and the balancing mechanism, which we will come to because it it talks to to to skip rates, which we we are definitely going to cover, just the size of the asset. So two hundred megawatts, four hundred megawatt hours. Does that look obviously, that that that is record breaking for GB, and it will also be broken as sort of more assets come to market beyond it. Is is the route to market different for a two hundred megawatt, four hundred megawatt hour asset?

It's it's not that the actual route to market agreement is necessarily that different. Obviously, it's a different risk appetite for off takers in the market.

But we're seeing that as that market develops, people are willing to take on more. The more renewables deploy, the more storage you need. So as a hedge in someone's who's an offtaker who may have renewables in the portfolio, you need more storage. So I don't think it's a it's a natural transition as things get bigger and there's more renewables.

Does it mean the offtake agreement is more difficult? Not necessarily.

You can also manage the size to be able to participate in different markets that you don't wanna put in two hundred megawatts into quick reserve on its own. You might wanna put different parts of the asset into different markets. Yeah. And we've done that with other assets like Capernhurst where it's split into different BMUs, and each is providing services in different markets.

Okay. And, perhaps actually, you just mentioned Capernhurst.

Would it be good just to run through kind of what Capernhurst is?

Yeah. Capernhurst is our hundred megawatt, projects.

First project connected onto the transmission network battery project.

That's slightly different. It has a reactive power, contract with National Grid. Oh, sorry. Neso now.

It is only a one hour duration asset, but it's located sort of just outside Liverpool, and been operational for over a year now. Okay.

Okay. Thanks. And then just, I mean, maybe just by one comment on the two hundred megawatts, four hundred megawatt hours. It's kind of it's not unusual for the GB system.

Right? We have many power stations that are one to two gigs in terms of size, in terms of the the the gas fleet that already exists. So maybe we shouldn't be nervous about going into the two hundred megawatts. And certainly, people like CIP have got four hundred sorry, five hundred megawatt projects coming through as well as bigger projects being planned by others as we get close to twenty thirty and beyond?

Yeah. It's, I don't think there's any reason to be worried about it.

They're not set up that necessarily if you lose part of the plant through an outage, you lose all of the asset. They're set up to be able to manage, parts of it on different strings and manage outages that way. So we shouldn't be worried that, you know, the bigger asset cause more problems for the grid.

You know, it's still significantly lower than a a size, well, see coming or a Hinkley, in reality.

But they are getting bigger. You know? It's economies of scale is driving that.

That's a significant part.

So we will get bigger storage, but I think that's probably needed.

I think there's a there's a Edwards and Sanborn site in California that's one gig, three gigawatt hours that's live at the moment. So, yeah, the the blueprint absolutely exists for those those really big sites.

Yeah. And we've got you know, there's there's projects out there who have got planning for over a gigawatt in in GB already.

So Okay.

It's coming.

Superb. And then I think just to just to pivot slightly. So you mentioned that you're located in Scotland, and one of the big parts about being located in Scotland is being dispatched into locational services.

Today, that comes through the balancing mechanism in terms of any kind of locational dispatch.

That is a that is an area where there's been a lot of conversation recently. Would you like to talk about kind of it's nobody's experience with the balancing mechanism to date and what has been changing over the last year and kind of where you see it going?

Yeah. So we we we have, another site in Scotland called Wishaw. So Wishaw is a two hour fifty megawatt, battery located just outside Glasgow.

That went live, and, again, the the premise is the same, basically absorbing power during those high wind and helping to manage constraints on the network.

We started seeing the challenges with that site and this infamous term across the industry, of skips. So, effectively, even though the asset was cheapest in the market to be able to import, it wasn't being taken. So it was effectively being skipped over in favor of other options.

Those other options were generally just turning off the wind.

So, obviously, that is not good for us. It's not good for any other participant in the industry.

So we decided to, set up a coalition of storage developers who are facing similar issues with managing constraints in Scotland and being skipped over on those effective constraint skips.

We've been working with NESO, on trying to improve that, but we we decided to obviously push it forward, raise it as an issue, focus on the constraint skips. The reason constraint skips, you know, there's two types of skips. You've got energy skips, which is not driven by the wind in area where you got a constraint skip. The constraint skip to us is an easy win.

Instead of turning off the wind, which is not good for anyone, it's hot. It means less renewables. It means more wear and tear on the wind farm. Instead, you absorb first in the battery.

So that was our focus. That's a quick win.

And, you know, in this focus of meeting twenty thirty, the more you can do quick saves money for consumers, and it's able to deliver that change. So we are focused on constraint skips.

We've been working closely with, NESO to identify those skips.

Obviously, they've been doing their own work. There's changes in the software coming, but it's really important we get this resolved. Like, storage has been a massive success. Right?

So we're over four gigawatts now.

You probably know a better number.

But that hasn't required anyone giving a subsidy, okay, apart from maybe capacity small bit of capacity market revenue.

But everyone's bidding into that. But it hasn't required anyone going, right. We're gonna give money to build out this.

The market's developed from an offtake perspective.

The technology has got cheaper. We're developing more, and we're not asking for more. So, we don't, you know it's it's a great thing. But if you have these issues in the market around skips, all it does is send a bad signal to investors.

You know, we need investors to support us on this transition.

And if you've got these barriers in the way, it will just change their position on should we invest in this. Yeah. And I think given Clean Power twenty thirty, what we're now talking twenty three to twenty seven gigawatts, we can't have these things get in the way of delivering and building out. So it's really important we move fast, we resolve it, and hopefully, we're in a better position.

Yeah. And loads in there. So, twenty three to twenty seven gigawatts, what's that number?

So that is all battery storage, to be built out in GB market, by twenty thirty under the government's clean power twenty thirty target.

Yep. Which would be a lift from today's, battery capacity, which is over four gigs, as you say. Four point seven, I think, is our number, which is, which is pretty incredible, right, given that ten years ago this was essentially zero. And as you say, pretty much all of it is built under a zero subsidy, regime, kind of unlike a lot of other techs coming to market. Yep.

And I think actually, maybe let's just talk about that for a second. Just on the Centimeters, we've kind of stumbled into it. But today, is the ninth Jan. The eighth Jan was a particularly kind of tight period in in the GB market.

And, actually, if you think about the the battery fleet, there was something like one point five gigs of batteries were turning on to discharge during that kind of peak period. When you take that four point seven gigs, it actually gets derated in the capacity market. So effectively says, oh, look at this. It's it's not worth as much as its capacity rating.

And that derating is something like ten to fifteen percent gets, gets gets taken through. Is that something that that you think might change in the future?

It it would be nice that I don't think the methodology is correct.

There's been iterations from NESO on changes to that, derating, but I think we need to use the evidence of how assets are performing in the market. And, hopefully, the events of yesterday, kind of demonstrate how it is performing, and that contribution.

So I think it's something you have to keep looking at. We can't just take this view that it's you know, the methodology that we put in before storage is deployed is the correct methodology that needs to be used going forward.

Yeah.

As as we get more data, update update the assumptions they have.

And particularly because when those tight periods happen is not something that is kind of written in stone. Right? So those type periods could happen during winter peaks as we saw yesterday, but they also could happen during summer periods. And it's interesting to get data on which texts were available and how they actually reacted to those periods at those times. Yeah. I think it's really interesting. Let let's let's get back to the the piece around, around skip rates because I think one of the the most interesting parts in this is, as you say, it's kind of being able to get investors, to have confidence that those assets, when they're in certain locations, will be called upon.

Do you think that that story is is is landing in terms of the progress made so far?

I think it's landers. I believe even the prime minister now knows what skips are, which is reassuring.

So I yeah. It it is we we can't emphasize enough how it impacts the business case. You know, balancing mechanism is so important for storage assets.

And it the message has landed.

It's not gonna be quick. You know? We understand that there are software solutions needed to be put in in the control room.

But we shouldn't forget, storage first entered the balancing mechanism balancing mechanism in twenty eighteen.

So we're quite a long way now from the first time it entered. Yes. It wasn't as active then or there are other revenue streams, But that said something about how we design a system if we haven't planned ahead and understood the role of storage and ensuring that markets are open to participate and confidence is there.

And I I think, actually, that kind of comment about batteries have been in the market since twenty eighteen, obviously, really in earnest in the BM since, like, November twenty twenty two ish. So kind of two and a bit years, in earnest in terms of wanting as much dispatch as possible. I think what you're talking about in terms of Nissan being ahead of, like, ahead of schedule and having the capability ahead of time is really important. Because when you look at things like demand type response or maybe from the bus side or from the Second Life battery side, being able to use those assets through something like demand type response to be really effective in the balancing mechanism, that's absolutely something we don't want to leave kind of out of the market for a couple of years whilst we get the house in order type thing. So it would be a call to to get out.

We can't afford to. If you want to hit these twenty or thirty targets, that means storage, DSR, other technologies. Like, we're not saying, DSR isn't treated unfairly at the moment either.

There are significant issues there.

Obviously, our focus is on storage, and we and there are specific requirements that need to be dealt with around it is a limited duration asset, so the systems, need to be in place, but it's also about making sure the control room staff are aware and kind of proactively using it. To me, we are it's at that point where we have to proactively take the decision to use storage to make sure that we are pushing it forward. Mhmm. So, that means sometimes favoring it.

The at the moment, we kind of favor the old thermal technology even though we might know storage is cheaper. That seems the wrong way around. We need to be a bit more proactive and go, let's take the storage first. Oh, actually, maybe it wasn't the right solution.

But, you know, that's what you have to work with.

Yeah. And I think in in context of kind of the work that Nissan are doing, I would say, Nissan, I've got a plan in place that runs from twenty three to twenty seven. We're roughly halfway through that. We've seen improvements, but I would say storage is probably being dispatched around half the level that we're seeing for some of those thermal assets. And so there's still sort of there's still a lot of that road to go in terms of further improvements to happen to storage assets.

Yeah. And I think what we wanna see is targets, but only so, you know, Ofgem has that role as the regulator to set clear targets on getting to a point where we're not discriminating against storage, but also other technologies.

And we're not at that point yet.

The program that's put forward by NECO is good.

There are significant improvements coming, but some of them are quite slow. The code process that governs some of these changes takes a long time, sometimes too long Yep. When we could go faster. Every day we don't have it, we're costing the consumer money.

Yes.

So that should be a forefront.

And I think going back to your point around investor confidence as well. So if you want to give investors confidence, saying there's a program of work and it's it's in it's in play and it's improving things is nice. But your kind of call for a target means that anyone active in the space could say, actually, this is the target that we're working towards. And therefore, like, an investor can see that and can understand it and can say, yeah.

Okay. I I see where this is going. And so I can commit capital to this this tech. And then, as you say, that kinda comes through in terms of lower consumer costs.

Exactly. It's you know, we have to explain to our investors why this this why this skip rate's happening.

We only have limited insight. We're not in the control room on a day to day basis. We have to explain it. It impacts their thought process, their decision. So, it's really vital to get, it resolved as quickly as possible and set build confidence.

Yeah. And maybe moving on from skip rates, I'm sure we could do skip rates for for for for longer. But more broadly, right now with the Labour government and Clean Power twenty thirty, we have a really big push on all things renewables, all things storage.

That's kind of resulting in a in a in a big, movement or change in terms of regulation and market structure. What else is out there that you are looking at as something that could be supportive for storage?

So we it's it's for us, it's less about what's supportive of storage in the market than change at the moment. It's kind of the things that are sitting there unresolved or not been factored in the true sort of benefit of storage. So, for us, we build transmission network projects.

There's good reasons we do that, to provide the services we do.

But effectively, we pay for the cost of the transmission network.

Now we put forward a change that would have benefited storage in what was called a code modification process that sort of governs that.

But unfortunately, it was rejected by Ofgem.

But at the moment, we don't storage doesn't get the value of the import it provides on the network. We're charged based on export. We're even charged as if we're a carbon plant. So we're classed as conventional carbon, which is an irony in itself.

But, effectively, we're not getting the benefit from how we behave on the network with the ability to import during constraints and then export after a constraint, for example.

So that needs looking at there is other code modifications happening, which, you know, terrible names to people with numbers called, like, p four six two, but these are changes to the market and that affect how we operate in the market.

Now some of them are have good intentions, but at a time when you're trying to build out, what you don't want is substantial changes happening and uncertainty and long processes.

Obviously, there's the there's Rhema.

No one still knows what's happening with zonal versus the national market price.

Again, that just provides, uncertainty in everyone's mind, and causes more challenges. Like, if you're if you're agreeing an offtake agreement, with your battery, you have to think about how these interplay into that agreement. How are you gonna protect yourself? These are all thoughts that you need to go through, and different people have different levels of risk. So it's kind of managing that.

I mean, just to that point, are those three?

So you just talk about, tenuous charging. So transmission network, use of system charges. So anyone connected to the transmission network, what are they charged? So that might vary over the over the coming years. You've then got your p four six two, which is essentially changing how your well, how you will be bidding into the balancing mechanism or how other assets bid into the balancing mechanism, which, again, changes your kind of your charging price and your discharging price in in future. And then you've also got Rima as well, which is a a a sort of national versus zonal discussion.

And so are you gonna be working with a national wholesale price and a locational balancing mechanism? Or are you gonna be working with a like a a zonal market? And then however that that balances between those zones kind of going forward.

And so you're saying that every single kind of contract you design on route to market almost has to kinda consider options on on either those sides? Or or do you could you kinda just just bundle it all into, like, one giant kind of change of law type rule?

Well, you you have to try and cover everything, but not everyone's willing to, take that risk. So it's a, yeah, it's a a long process. It adds more complexity, to trying to negotiate agreements. But, also, a lot of the old you know, we talk about changes to the market.

There's lots of contracts out there, existing services, existing offtake. You know, if you start changing things, you're gonna have to open up all of those agreements, have, disputes, legal fees, all of these kind of things. So there's lots of changes and implications from it. Doesn't necessarily mean that the change is wrong.

Right?

So as you were just arguing for for Tenuous, if the change is is is needed, the change is needed.

Yeah. Yeah. That's that's fair. So if it's if it's needed, then, yes, It should it should be pushed forward.

But it has to also be you have to demonstrate with evidence.

Okay. And maybe just kind of last point on this. One thing we've seen in the market, certainly kind of, moving over the last few years is that early battery storage projects were mostly focused around kind of profit share type structures. More and more we hear around, structured products. So things that include, say, flaws or particularly last year, tolls in the octopus and Gresham. And then we also have the, pentopar and shell toll.

Kind of this amount of regulatory change at the same time as people wanting to put fixed numbers on things for fixed periods of time. Does that kind of does that make it kind of more or less impossible to do?

Or is is it It's it's not impossible.

Obviously, it is happening.

Those those agreements that that market is developing. Like, tolls didn't exist, okay, very long a long time ago.

You know, they came they've come from gas industry and gas CGTs or the where tolls were quite common actually in GB market.

Well, not common, but there were a few.

Now that market's developing, the worst thing here is is start getting in the way of it and causing more concern. If you can develop that toll market further, and, again, people will still want flaws as well, if you can develop that, provide that certainty, then people are willing to do it. And, obviously, that makes hit makes hitting twenty, thirty target possible.

Okay. Okay. Great. I think let's let's move into the ancillary services part of the discussion. So, obviously, people expect batteries to be providing frequency response services, much of the fleet has been doing that for a long time. You mentioned a couple of other services that Capenhurst as well as Black Hillock have been providing.

What does the right well, let's talk a little bit about those services as a refresher. But then what does the right design of those system those, those those services look like going forward?

Yeah. So I guess there's there's different types. There's a lot of different types of service. Obviously, there's the frequency services that are most common now, which is effectively effectively rapidly providing active power onto the network, exporting, importing quickly as a way of effectively providing synthetic inertia.

You then have your reserve products, your quick reserve, which obviously vital in terms of being there to provide, reserve on the network when required.

We're now moving, I guess, to other services, and NESO is reforming some of those services. So reactive power is a good example.

Providing that reactive power onto the network is also a requirement. Everyone gets focused on megawatt hours, but you need megavals in that reactive power to support the network. It's required.

A lot of that has been traditionally provided again by thermal plants historically, but there is a specific requirement for that reactive power in certain locations. So Cape and Earth has a reactor power contract, to provide that in the Merseyside area.

It it feels like a maturing of markets. Right? So when storage first comes into the market, it generally does frequency response. So very short bursts of power, keep good frequency where it should be. Second phase is kind of the megawatt hours start being used and you start seeing energy balancing services coming in. And then as people get more confidence in terms of what storage can do, some of these additional services, some of the megavirus provision start to come into the market.

It? But but come coming back to maybe coming back to the the the question, what what do you think the right market design looks like for those? How are you getting the right signal to to know where to build them?

Yeah. So I guess, NESO started with this approach of Parfa under contracts, which is which is great. You know? It's been one of the first system operators to deploy those kind of pathfinder projects.

They, they set the tone for where you wanna go. Right?

From that, you then start. You might have to transform them into more structured markets where it's kind of a, and that's what Nestle is doing with this year four year ahead, contracts, then a year ahead, which is currently in the process of role offering out those agreements. So recently gave a year minus one voltage and a year minus one stability contracts.

Now we're moving into even shorter term, so effectively, day ahead markets release. So that has been the natural progression, you know, moving from Pathfinder through to day ahead. Mhmm. And that's great. That just provides more optionality for storage to participate in all these different markets. Mhmm.

So, yeah. That's the kind of natural transition, really.

And I think there's there's also definitely a message in there for kind of other grid operators in terms of how that's been done within GB, in terms of being able to get the most out of your storage fleet.

In terms of as someone who has been investing but also operating those assets, you've kind of seen those services. You've seen how they've been developed through from Pathfinders into sort of data head markets. And broadly speaking, it's been a pretty successful process.

Yeah. Yeah. I think it's it's been successful. There are still things to work out. I think, there needs to be there still needs to be, a bit of innovation, a bit of understanding how storage works. We worked we tried to work closely with Esso as well as others have, to try and inform them how storage behaves in some of these markets, because we're still probably not at a point where, you're capturing the full value from them.

You know, also, if you set the market design that is quite stringent, that's gonna limit participation. If you can be a little bit more flexible in that to accommodate the fact that storage is more dynamic, it's participating in other markets, it does need to move around between different markets, can bring lower cost to consumers, but it means taking a slightly different view on your traditional procurement, being a bit more flexible, understanding how storage works, and working, with developers to kind of open up and unlock some of these.

So maybe an an example of that is, instead of procuring things on, say, a monthly basis, going down to a more near term procurement where you're procuring on maybe a half hour or hour hour basis will allow storage to kinda swap in between markets as they see fit.

Yeah. Exactly. It's not about you don't wanna lock storage into a specific commitment too much. Like, yes, NESA will need certain commitments to meet their requirements. But if you can be a little bit more flexible and say, okay, we're not gonna lock you in to or restrict you providing this other service, and we're gonna do it as close to real time or near to real time as possible, then that just provides the ability to do more services.

Yeah. Oh, it's it's super interesting. This is very much the cutting edge of, like, how can we squeeze the most out of these assets that we are now adding to the system. And if we can do if we if we can get Clean Power twenty done, I think a lot of it will come from being able to squeeze more out of these Swiss Army knives as as as as you as you mentioned.

And I think that's where Clean Power twenty thirty is great. It's all focused on megawatts at the moment. What's interesting is where it will go with the strategic spatial energy plan setting this blueprint. It's not just about megawatt. Storage is not just there to do that. It also provides this reactive power inertia as Black Hillock will be doing, and that allows you to not run thermal plants as much. So, obviously, the target is, what, five percent load factor on a CGT.

If you can provide these other services and storage and synchronous compensators, condensers, you can effectively reduce that running further. We're still paying a large amount to thermal plants to come on and provide inertia, reactive power, although short circuit level in certain locations.

We saw that all through this summer. Right? That that we had sort of zero pound pricing, almost almost negative pricing. And the gas fleet didn't drop below sort of two and a half to three gigs, which essentially is saying those gas units, they're running for something else.

They're not running on the base of the wholesale price. They're running on the basis that they're providing other services. Yep. And so the as soon as we can open that out to kind of low carbon options, then all of a sudden we can turn off those plant.

Exactly. Yeah. Okay.

And let's let's maybe go to one last area. So I just wanted to talk a bit about the the cap and floor, which is around long duration energy storage. How does Noby think about long duration energy storage? How do you think about the cap and floor?

Yeah. So we're we're technology agnostic. We will effectively look at what the market needs, what actually makes commercial sense, and we will develop that.

The elder scheme, has been pushed through ferociously, as a scheme.

We are we understand the need for long duration. You know?

There is long events, for example, in constraints that require long duration storage.

So there are there are elements where it's needed.

The concern from our side is that we're pushing through this scheme quite quickly.

No one, at no point has it properly been assessed the impact on the short duration market.

And I think there is a statutory obligation for Ofgem to actually do an impact assessment, but it's not been done. So what we like to understand is really much more clarity about how the two markets interact. You want twenty three to twenty seven gigawatts in Clean Power twenty thirty. I think you want maybe one to three gigawatts of additional LDIS.

So by changing one, you're impacting the other. And the problem is you if you start pushing through policy quickly, what always happens is you end up with unintended consequences.

And being that you could be the best consultant analyst in the world, but trying to understand the impact of introducing a policy on all the other markets, getting it correct, is really difficult.

And we need to do that impact assessment, understand how that's gonna work, how what are the markets that elders is gonna participate in? We're not saying we don't need elders, but I don't think it's been thought through on the impact. And that's the big risk we face is, again, you it's another thing to explain to investors. How much elders are they gonna procure?

We don't know. How is it gonna affect your market? We don't know because no one's done it. So these are things we need to consider.

Yeah. I think that's, I think that's that's definitely required.

And and to kind of to to flesh that out a little bit, I think if there's a if there's a kind of no cap on the elders, you might end up instead of having three gigs, you might have six or ten come through. And that obviously has a ramification for the short duration storage that's both on the system, but also the short duration storage to come.

And how valuable is it for a consumer to build a load of eight or ten hour storage if that is not the thing you need for dealing with eighty, ninety percent of the the the storage requirements that you see within day.

And it's it's a it's a locational aspect to how in interplay is. Like, you know, if that LDES is in Scotland, it's predominantly gonna be used for constraint management LDES. You're paying for a constraint management because we don't have enough network.

Now is that LDES gonna participate in an hour duration constraint? Yes. Yeah. But hang on. The storage is also gonna do the hour. One is protected. One is not.

There doesn't seem, that alignment. And this is despite, I think, the Regen LCP analysis that was done kind of said, actually, it's more beneficial having it in England than Scotland.

But most of the pump storage is in Scotland.

And we're also, at the same time, trying to go through this, spatial plan, and this, centralized network planning for how the transmission network will look. So we've kind of going we want all these elders, but we haven't done those blueprint strategic network analysis yet. So it seems the wrong way around. We're pushing it ahead of doing the proper analysis we need.

So we'd certainly encourage slow down a bit.

You know, there's been a big change in trying to get through policy, trying to get things done. We understand that. But if you do it, it risks unintended consequences.

And also when you when you can define what you need and then having a kind of a market approach where where people then bid in to to demonstrate that in the cheapest possible way, generally gets you some some pretty good results. And so, you know, we've seen that, for example, in frequency response where a market requirement has been set, then the battery fleet has come in, out competed gas by something like eighty percent reduction in in costs for for consumers. And surely, we want to kind of try and find that again. I think one one thing that's also kind of coming up within the elders piece is that they're look are looking for, say, six to ten hours, but they want that six to ten hours at rated power. You referenced this earlier today around, Black Hillock, so two hundred megawatts, four hundred megawatt hours.

That is a two hour system, but it could also be a six hour system. Right?

Yep. Yeah. Exactly. So, like, I think Ofgem is now proposing an eight to ten hour maybe for the sort of tranche one of the older scheme, which is the big scale older stuff.

Yeah. Storage, battery storage can, effectively do that duration if required. It just means derating your power further and providing for longer.

And a con a consumer doesn't care whether it's a fully Yeah. A a rated power plant or whether it's a derated power plant running for eight hours. It's it's it's irrelevant.

Exactly. And SO as or an SO as system operator would have the ability, in theory, to take different plants, combine them to provide that constraint over a longer period and support it. So we don't see it as restrictive. You know? I think your analysis has shown that battery storage is more competitive potentially than a pump storage at maybe six, maybe even at eight hours now with CapEx changes.

So, it's changing so much as well. It's difficult to go, right, we're gonna commit to thirty year contracts on elders, you know, for pump storage or whatever. It's quite a risk, especially for the small scale duration projects. I think if it's a longer duration, I think it's a clearer business case.

Yeah. So you're saying if if the work is done and there's a very clear need for an eighty hour, storage system, let's say, it's it's kind of it's quite clear that that doesn't get provided by the market as designed today. And so there's a need for some sort of intervention. But when we're looking at six or eight hour systems, that absolutely could come from from lithium systems. Very difficult to design policy really well, as you say, with the the cost changes we saw in the last year. But as long as you leave an open market, then then you should be getting in, the lowest cost solution to that.

Exactly. And, like, you know, I guess an eight hour solution, just I don't know. Eight hour pump storage, personnel, I guess, I struggle. That seems the right decision.

But if Ofgem is assessing and has the correct data in the LDAS scheme and goes, actually, the six hour duration is not is no more effective than a battery storage solution. It shouldn't give an LDIS contract. Right? Yeah. I hope that's transparent.

I don't know.

Yeah. We shall see. I mean, as long as people are kind of looking at consumer costs and that's the that's the key element of it, then hopefully the the right decision should be should be arrived at. And, obviously, they should also look at other markets as well to see what decisions other people are taking around how do they manage six or eight hour, duration storage questions. Okay. That broadly takes me on to the the last two questions I want to ask. So one is on, is there anything that you would like to plug?

I don't think there's anything plug we're developing, we're building.

One of the things we're always looking for is obviously good people.

We're often recruiting as we grow, as we do more.

And, you know, this is it's real the supply chain from a and, like, the skills perspective of having good people, it it's it's a growing market. There's an opportunity for people to grow and get be involved in it and shape it and develop themselves. So always looking for good people, is probably the only key thing I push.

Yeah. I think that's I think that's absolutely worth plugging. And then the second part, so do you have a contrarian view? Do you have something that that you believe that you you think that the majority of the market doesn't?

I don't think I have a I often have strong views, maybe.

I think probably the only area where I think is maybe overoptimistic is on colocation.

I think there's a lot of talk about it. I think it does make sense in certain, circumstances, maybe with solar, getting the sizing right.

But to assume it's always the best thing to do, is it best from location on the network?

Just because the costs might be lower from sharing infrastructure doesn't mean you're putting in the right place to get system benefits overall.

You know, if you're providing that inertia or reactive power Yeah. Putting an extra sofa might not be the best place.

It might be, but I think all these kind of things, Yeah.

That's a that's a it's a really good point. Right? So I think people tend to think in terms of megawatt hours, as you were saying earlier. That's so people people are megawatt hours based and you can you think, okay, this is what the solar profile looks like. This is what the storage profile looks like around it. But to your point, if you're not thinking about that but you're thinking about kind of constant inertia type provision, then actually, colocation probably isn't the right, the the the the right solution, particularly if you're colocating with solar in Scotland.

Yeah. Yeah. I, you know, maybe some of this will come out of the sort of strategic plans that are being worked on the network, and there'll be a a bit more clarity. But I think it's it's really important not just to think about everything as megawatts, megawatt hours. There are other services storage providers that are vital to the network and getting the right location, sending the signals, as you were talking about, designing the markets that enables us to do more.

Tom, that's a really good place to leave it. Thank you very much for coming on to Transmission. You've been a fantastic guest. We hope to have Zena be back on again soon.

It's been a pleasure. Thank you.