Aurora: Smart grids and storage present £6bn opportunity

The fledgling market for batteries and other forms of flexible power generation is set for rapid expansion over the coming decade, according to a new analysis from Aurora Energy Research.

The analyst house yesterday hosted a Battery Storage and Flexibility Conference in London, where it published new research predicting that the next stage of the low carbon energy transition will trigger £6bn of investment in flexible generation assets through to 2030.

The firm said it expected around 13GW of new flexible and distributed generation assets, such as gas reciprocating engines and batteries, to be deployed as part of the investment programme.

It added that the falling cost of batteries and the emergence of a range of flexibility services is leading to the emergence of a range of innovative business models, such as co-location with storage and renewables and new trading strategies, which are proving attractive to investors.

Aurora CEO John Feddersen argued that flexible and distributed assets are fast becoming a mainstream part of the UK power system, citing recent high profile deals such as the sale of UK Power Reserve to SEMCORP for £216m and Green Frog successfully raising £100m of debt to fund the development of new projects.

Only last week UK Power Reserve and Fluence confirmed plans to build 120MW of new grid-scale battery capacity.

Aurora said flexible energy projects are also beginning to dominate ancillary services markets, with gas engines and batteries providing 40 per cent of frequency response contracted by National Grid.

The company added that a number of recent policy developments, such as the reduction in de-ratings for duration-limited storage and the low clearing prices in the Capacity Mechanism auction, were opening up further opportunities for developers and investors.

"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, that has benefits across many levels," said Steve Shine OBE, executive chairman at renewables firm Anesco.

Richard Howard, research director at Aurora, said the growth of the storage and flexible grid sector provided further evidence the power industry is changing faster than many people expected and creating a raft of new opportunities.

"The power system is rapidly evolving towards a decarbonised, decentralised and digitalised future," he said. "Reforms to policy and market design need to reflect this - not only to keep up with this energy transition, but rather to enable it. 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."