Flexible energy projects offer £6bn opportunity for UK investors

The UK’s rapidly evolving energy transition is likely to trigger £6bn of investment in flexible power generation technologies between now and 2030, new research has found.

The analysis by Auroa Energy Research suggests there will be 13GW of the smart technology deployed by that time, including battery storage and gas reciprocating engines.

The firm highlighted how flexible energy projects are starting to dominate ancillary services markets, with gas engines and batteries providing 40% of frequency response contracted by the National Grid.

Moreover, the last 12 months have seen major changes to policy, regulation and markets that have boosted the business case for investment, including a drop in prices in the frequency response market.

“The power system is rapidly evolving towards a decarbonised, decentralised and digitalised future,” Aurora research director, Richard Howard, said. “Reforms to policy and market design need to reflect this.

“Over the period to 2030 we expect balancing and ancillary power markets to double in size to around £2bn per year, opening up opportunities for flexible generators and storage to access new revenue streams.”

The sale of UK Power Reserve to SEMCORP for £216m, and Green Frog raising £100m of debt this year, are just a couple of examples that show flexible and distributed assets are becoming mainstream, according to Aurora.

The firm explained how a reduction in de-ratings for duration-limited storage, and low clearing prices in the capacity mechanism auction, were opening up further opportunities for developers and investors.

In addition, ongoing reforms are expected to open up a range of opportunities for new companies to participate in small-scale distribution generation in the UK’s balancing mechanism.

Firms like Anesco and Eelpower are already exploring this opportunity, while further reforms led by the National Grid should also open up access to ancillary service markets.

“There has been a visible shift in the way such technologies are being regarded, and what may once have been seen as a high-risk investment, is now considered a strategic long-term investment,” Anesco executive chairman, Steve Shine OBE, said.

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