The battery energy storage system (BESS) market in the UK has been somewhat volatile throughout 2024. Owing to plummeting revenues and concerns about the technology’s scalability and the policy environment in the UK, several major BESS investment firms have had to sell off some or even all of their portfolios to continue to stake their claim in the market.
However, while some have had to change tack in order to cope with the winds of change, other firms have continued to thrive. Independent power producer (IPP) Econergy saw a major win in the autumn of 2024, as the company’s Swangate BESS, a 50MW/102MWh development in Yorkshire, successfully secured a route-to-market agreement and financing deal with international banking giant Goldman Sachs. Goldman Sachs International Bank provided financing for €32 million (£27 million), of which the majority was used to pay construction costs and repay existing shareholder loans.
With the project now connected to the grid and the start of full commercial operations imminent, we sat down with Josh Murphy, head of storage at Econergy, to discuss the Swangate project, the recent struggles of the UK BESS market, and what the future holds for the sector.
Clearer days are ahead
Although the market’s recent past has been turbulent, Murphy notes with some optimism that the latter end of the year saw BESS revenues begin to stabilise, a trend that he sees continuing into the next year and beyond.
He notes that indexes such as Modo and LCP have seen BESS assets generally performing at around £100,000 per megawatt per year since around October – November 2024, and since this time, they have been fairly consistent. He notes too that assets funded by Goldman Sachs—like the Swangate project— have been consistently performing, according to Modo Energy, at between £100,000 to £110,000 per MW annualised over the last four months, a positive sign for the future potential revenues for the Swangate project.
The Swangate project was connected to the grid late last year, and Murphy notes that the company is still conducting various tests for the markets and services that the project will be involved in. While unable to disclose a timeline for when this work would be completed, he noted he was optimistic about the progress of these efforts.
Grid connections continue to be a concern
Unsurprisingly, Murphy shares many of the frustrations that a large proportion of the renewable energy industry—not just those in the BESS sector—have with the current grid connection timeline in the UK. He states: “Like most European countries, grid connections are a huge bottleneck here, and it’s spoken about a lot across different forums. We’ll do our scoping, and we’ll find a good location, and then the timelines are just, quite frankly, crazy.”
Murphy attributes this grid bottleneck to a number of different factors: firstly, the abundance of so-called “zombie” projects in the connections queue. He notes that while Econergy, as an IPP, has a high degree of skill and confidence in their projects by the time a grid connection application is submitted, this is not always the case for the developments ahead of them in the queue.
“When we go in to put in a grid connection application, it means that we are confident in the technology. We have the funds to invest in the project and build it, and the expertise to do it. It’s not always the case that everybody in that queue is an experienced and serious player. So often, we’ll find ourselves behind people that aren’t really going to build anything and they’re just bugging the queue.”
While this is something that will hopefully be solved by NESO’s latest grid connection reforms, which will see developers needing to meet specific standards of readiness and strategic alignment with local needs, the other major problem, in Murphy’s view, is one that is also frequently discussed across the renewable energy sector; the green skills gap. He notes: “I think there’s a huge skills shortage and manpower shortage within the network operators themselves. If we’re going to meet 2030 and 2050 extended targets, then that really needs to be addressed, and these guys need the additional people to deliver on the connections.”
Tech improvements bring new possibilities
In his role as head of storage for Econergy, Murphy has a significant interest in the technology developments in the energy storage sector. He notes: “The output capacity of containers is continually improving, and so is the cycle count, and so is safety. Those three things combined for us—as somebody who’s investing in and going to own the project—are great signs we can get more energy capacity out of an available footprint on the ground.”
He adds that the continuing improvements in fire safety have also helped to increase investor and public confidence in BESS developments, making it much more likely that further BESS projects will come to market.
Furthermore, the increased technical proficiency of BESS developments—particularly as more are able to black start in times of grid failure and synthetic inertia becomes increasingly useful—makes the attractiveness of BESS development increasingly clear.
So what’s next?
When asked what the next five years are expected to hold for the BESS market, Murphy believes that the assets that will do best are those that maintain a certain degree of flexibility with how they develop and build over time.
He notes that Econergy has taken on the strategy of applying for planning permission to build longer-duration projects than they will initially deliver to ensure that over the 15-25-year lifespan of the project, there is room to grow and develop as the market does.
“We want to make sure that we’re best in class, and so have the flexibility to move and navigate with the market. So, for example, we would apply for planning for a six-hour project or an eight-hour project, which allows us the flexibility to augment a long- or medium-term project, as capex might change in the market,” he says.
“Alternatively, we might see saturation in peak prices due to deployment of lots of 2-hour batteries. We want to be able to mitigate against that. So we want to plan for everything, and when we get to the time to deploy it, we make our decision.”
For Econergy, in particular, 2025 is set to be an exciting year. Murphy notes that the firm will have 220MWhs of operational storage and a further 700MWh in construction across Europe.
