Opportunities in energy storage
As we approach the winter months, energy supply margins are expected to be tight as a number of key supply points suffer outages. This is leading to the expansion of a new wave of ‘Demand Response’ developments and in turn, an opportunity for landowners who own rights to appropriate development sites.
As landowners often control access to key grid connection points or land rights required to facilitate new energy projects, this new market presents a significant opportunity for landowners who act early to secure lucrative development opportunities.
With some 1000MW of Demand Response capacity expected to be deployed by 2020 and as much as 6-8GW by 2030, we are seeing an influx of approaches to landowners across the country by developers and site operators. Developments can be anywhere between 5MW and 100MW with most schemes looking to enter the next Capacity Market Auction in 2017 - a yearly auction that provides payments via contracts of up to 15 years for new build projects that can guarantee their availability to generate when required during peak periods of energy demand.
In order to be eligible for the Capacity Market, a valid planning permission and grid connection is required. Developers are looking to align sites with viable grid offers in place and planning permission, in order to be successful for the next auction - the progression of both elements critical.
The Capacity Market favours diesel generation at present, although cleaner gas and battery storage technology solutions are set to be offered more preferable subsidies going forwards. Grid applications are technology specific and need to be prepared accordingly for each individual site. With different income streams provided for each technology, developers are seeking connections into overhead lines, or direct wires into primary substation infrastructure from 11kV to 132kV, depending on the proposed technology and appetite for developing larger schemes.
Access to grid is critical to the viability of such developments, and in the absence of any compulsory rights of access, landowners can often find themselves in control of sites and land rights that can facilitate access to key grid points of connection.
In order to take advantage of this, landowners are advised to enlist professionals to review what access their sites may have to such grid capacity, and how they can best seek to protect this. If such grid rights are given to a developer at an early stage, landowners can often find themselves in weaker negotiating positions, and forced to accept unfavourable offers from developers who are making numerous blind approaches to secure the grid and a suitable site within each area.
Whilst rental approaches often seem appealing given the minimal land-take required for these developments, landowners need to be aware of the potential income streams available to the operators of such sites and the potential revenue behind the business model. Like solar and wind, the land rental market for such sites is in its infancy and initial land offers are often someway adrift of what “the market” is willing to pay for a site; in some instances by a factor of 9.
Once again, access to the grid network is the key site constraint and landowners could benefit considerably by approaching sector experts for advice on how each individual case might be best taken forward.
Clare is based in Harrogate and manages renewable (including medium wind, solar, hydro and biomass) and peak power generation development projects across the country, from initial feasibility through ...