Energy storage in batteries offers good opportunities for landowners as the quest for the UK to reach net zero carbon emissions by 2050 continues.
Battery storage can play a key role in helping National Grid to make the grid resilient, ie balancing energy supply and demand to match the daily needs of UK homes and businesses, allowing excess energy to be released to the grid within seconds at peak demand and the grid to offload surpluses (at times of ‘wrong time supply’) to batteries for later use.
This becomes increasingly necessary as renewable electricity schemes become more decentralised, intermittent (the wind does not always blow nor does the sun always shine in the UK!) and non-synchronous. Large-scale fossil fuel generators are disappearing, the 2016 closure of Fife’s Longannet power station, once Europe’s biggest coal fired power station, being an example. Electricity demand is far from constant and there are major fluctuations on a daily or seasonal basis, a challenge which can be exacerbated by voltage restrictions in some parts of the UK. National Grid has predicted that at least 40GW of new capacity needs to be connected to the electricity system in the next 10 years if net zero carbon emissions is to be achieved by 2050. Demand for electricity is also set to grow significantly owing to the heat and transport sectors, with the planned move away from gas powered boilers by 2025 and the proliferation of electric vehicles.
Location, location, location
Battery storage may be stand-alone, or as part of an energy park combining other technologies such as wind and solar, an example being the proposed 50MW battery storage of ScottishPower at the 215-turbine Whitelee Windfarm, which was originally scheduled for completion by December 2020. Scottish Water is developing a combined solar and battery facility near Perth’s Waste Water Treatment Works at Sleepless Inch.
Grid proximity is vital, so the focus until now has been on siting assets closest to areas near other power infrastructure, but as costs continue to fall in the sector it will become more economical to develop further sites. Battery module prices are expected to fall in the US by around 32% between now and 2025 and a range of technologies are evolving. Lithium battery storage (the most commonly deployed technology to date) uses electrical energy as chemical potential energy using lithium and carbon-based electrodes. Lithium battery use is already widespread in the consumer electronic sector and in the growing electric vehicle sector. It allows very rapid response (well within a single second) if power needs to be stored or released. A downside is it is highly reactive and flammable, therefore safety and environmental issues arise. Other technologies such as zinc batteries (at an earlier stage of development) are less efficient but have the advantages of being less hazardous and non-combustible with lower CAPEX costs for higher energy projects.
Landowners: opportunities and pitfalls
Landowners may stand to benefit from good rental returns from sites with rents offered on a per hectare basis or according to the installed capacity in megawatts of the storage facility. Landowners ought to be wary of accepting rents based on per hectare values only as there is potential for containers to be stacked. Option payments tend to be low reflecting the relatively speculative nature of the market at this time.
Landowners should proceed cautiously before signing up with developers offering battery storage projects. Lack of available grid capacity can be a major cause of projects not progressing and although batteries only balance supplies rather than generate there must be enough capacity for a full discharge to the grid. Developers will likely explore an assortment of smaller sites in the hope of packaging a group of sites together for development and funding if constraints are manageable but there is no guarantee individual sites will be progressed. It is also vital to bear in mind that a grid offer is personal (unlike planning consent which runs with land) so beware of developers offering to make grid access applications and seeking letters of authority from a landowner to do so. It is better for the landowner either to explore making its own application before putting a site out to tender with several developers or to give consent for a developer to apply but only on the basis that any grid offer is transferred by the developer to the landowner if contract terms cannot be agreed, or the project does not proceed.
Another issue for a landowner to consider is the developer’s track record. Will the developer give a legal commitment to meet abortive costs if project does not go ahead? Is there an assignation (or change of control) fee if the project is sold on to another developer? Do the legal documents provided by the developer allow changes to be made to what has been agreed by any funder (this ought to be resisted)? This is likely to be a particular issue if numerous sites are being packaged up, where a funder may have a greater desire for uniformity. Is a restoration bond or insurance-backed product on offer to fund any restoration clean/up at termination of the?
For battery storage as an add-on to wind or solar projects, careful consideration ought to be given to whether the storage is in connection with a specific wind or solar project, or if the developer is offering services for power balancing to the grid – eg providing frequency response services to help match power supply and demand at short notice – in which case there may be further potential rental opportunities for landowners.
There are attractive rewards for the well-advised landowner.