Conrad Power, a subsidiary of I Squared Capital, last week acquired Viridis Power, a spin off from the Green Frog group of companies. The deal saw Conrad take ownership of 320MW of distributed reciprocating gas engines, nearly tripling the size of its operational fleet from 120MW to 440MW, now spread across 28 sites around Britain.
The company currently has enough projects in development or construction to take the figure to 1.1GW and is on course to pass half a gigawatt at the start of next year. It is eventually aiming to grow the portfolio to 2.2GW of flexible generation.
This will include 200MW of battery storage capable of discharging at full power for up to four hours. Conrad Energy executive chairman Damian Darragh says long discharge duration will allow the batteries to “serve very similar functions to the market” as the gas peaking plants.
Given their requirements, the team at Conrad did consider technologies such as vanadium flow batteries that are “very well suited to the long-duration storage application”.
But Darragh says they are “currently, from a cost perspective, not really competitive”, adding: “Even with the higher levels of degradation you’d expect from a lithium-ion solution, they’re a better commercial option.”
Darragh says the falling cost of lithium-ion batteries means they are now getting to the point where they can be commercially viable for long-duration storage applications in the right circumstances.
He says this has not been the case previously, with most already operational batteries focused on shorter duration applications such as frequency response: “To get it right, to get the economics to work, to get the capital cost where it suits the application matching the right locations and with the right project size and with the right regulatory support, hasn’t really come together yet.”
“We’ve been working with some of the equipment suppliers to show them our expected usage profile through an average week, an average season and so on,” adds Darragh. “They have then played back to us how they expect the degradation profile of their solution to respond to that application. And then we’ve built a contractual framework around that with warranties and so.”
He says they now face the challenge of how to operate such a large number of small plants: “We have to have remote control of a large a number of power stations and we also have to think very carefully about how we then take those assets to market from a commercial point of view.
“We have a lot of assets in a lot of different locations with a lot of different operating parameters and we’re working in markets that are increasingly volatile and the services that we provide are complex and market-driven”.
Along with the various code modifications to end the double-counting of storage for network charges, Darragh welcomed Ofgem’s recent confirmation that a definition for energy storage will be added to the generation license in November, stating: “It’s something we’ve been asking for quite a long time. I guess we’d gone down the path of assuming it would never happen”.
But Darragh says the government and Ofgem still need to do more to deliver the amounts of storage necessary to decarbonise the energy system: “I think the bigger question for storage is really around the incentivisation for companies such as our ourselves and our peers to make the investment. It is insufficiently clear what the incentives are to provide storage and I think there’s some way to go yet in terms of legislation coming through that supports the economics.”
“That’s the bit we’d really be looking to the government and Ofgem to think hard about,” he adds.
Darragh says the Capacity Market has been a “fundamental pillar” of the projects Conrad Energy has developed to date and that he expect prices to rise as margins become tighter over the next decade: “We can certainly see a lot of retirements coming… Something needs to replace that”.
He continues: “It’s had its issues in terms of being contested; it was in suspension for a while; we’ve seen some low prices at times; but I think the last auction cleared at a sensible level and has given people encouragement to participate in the next auction”.
At the same time, Darragh says the mechanism currently only provides a “very small incentive” invest in storage: “The Capacity Market solves capacity but I’m not sure it solves storage.”
More generally, he believes energy storage has been undervalued in the UK to its natural abundance of fossil fuels: “Historically as a country we are not accustomed to paying for energy storage.
“If you go back 30 or 40 years, we had the North Sea oil and gas. We were a primary producer of energy, so as a country we didn’t have to build storage into our energy system thinking because we just turned up the taps in the North Sea to produce more gas when needed.”
“If you look at the amount of gas storage that sits on the continent in countries that didn’t have that kind of position – countries like France, Germany and so on – they’ve always had significant gas storage infrastructure.”