VATTENFALLCO LOCATION OF BATTERIES AT

RENEWABLE SITES

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SNAP SHOT

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1 Case Study of Wind and battery storage co-location at PyC

2 The Market Reality

3 Regulatory Challenges

4 Advantages of co location

5 But its not that easy!

6 What we can offer

7 Any Questions?

CASE STUDY: WIND AND BATTERY STORAGE CO-LOCATION

Vattenfall’s EFR Battery@PyC • One of only eight successful bidders in the National Grid Enhanced

Frequency Response (EFR) 200 MW Tender in July 2016 out of 37 providers and 1.2 GW of projects offered.

• EFR assists National Grid’s obligation to maintain system frequency within +/- 1% of the target value of 50Hz, by offering a sub second response for a maximum duration of 15 minutes.

• Vattenfall were able to bid competitively by utilising the existing onsite grid connection and land as well as a favourable battery contract with BMW using their BMW i3 Lithium-ion batteries.

• Operating independently from the wind farm, the storage system will provide EFR and Capacity Mechanism services for the first four years and thereafter frequency response services to the network.

• It is currently under construction and the Commercial Operational Date is March 2018.

CASE STUDY: VATTENFALL’S EFR BATTERY@PYC

SubstationTurbine

Battery Location

The 76-turbine Pen y Cymoedd wind farm reached its full generating capacity of 228 MW in spring 2017.

PROJECT SUMMARY

• 22MW 16MWh Frequency Response Battery Project

• 5 battery shipping containers + 1 MV station container + Inverters & Transformers

• Revenue: Enhance Frequency Response (4yr contract) + Capacity Market (15yr contract)

• Embedded in PyC user system network

• System Integrator: Belectric

• Battery Supplier: BMW

• Civils sub-contractor: Encon

• Multiple interfacing parties

THE MARKET REALITY

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Today most battery developers are basing their business cases on a combination of revenues from Capacity Mechanism and Frequency response services.

EFR / FFR Demand

c. 1 GW of FFR

200 MW of EFR

1.2 GW total

Battery Projects

200 MW of EFR projects

3. Source: Solar Media

330 MW of CM projects Dec 2016 auction

BUT 2.5 GW of pipeline projects6

3.3 GW total

Plus 700W of existing pump storage hydro

A BATTERY PROJECT IS NOT A SOLAR FARMThe removal of the RO subsidies has led to a large number of solar developers entering the battery storage project market, but….

• No stable long term government subsidies, instead there are short term grid service tenders with no guarantee of success or

• Balancing mechanism or arbitrage but these are merchant risk, self cannibalizing and are often based on hindsight trading

• All this makes project financing extremely difficult or very expensive

REGULATORY CHALLENGES

Positive moves• Removal of ‘double charging’

for storage, treating storage, for the purposes of network charges, as purely generation asset class

• Ofgem decision around RO accreditation for three 5 MW solar PV farms retrofitting co-located storage

• Ofgem report on Upgrading our Energy System which aims to remove barriers to energy storage

Uncertainties• BEIS Consultation around the de-rating of

storage within the Capacity Market• National Grid System Needs and Product

Strategy Consultation (SNaPS) potentially introducing shorter FFR services

ADVANTAGES OF CO LOCATION

• Very roughly co location adds about 2 to 3 % to the project IRR.

• Battery EPC costs, land costs are fairly standard across all projects but co location either through using spare grid connection or using the same grid capacity allows for much lower grid costs, slightly lower land costs, easier planning and given the relationship with the landowner an easier and cheaper development.

• A lower cost battery can afford to bid in lower on competitive FFR and CM tenders, afford to take lower arbitrage opportunities and lower balancing mechanism actions

• In short in an oversupplied market with competitive tenders only the lowest cost battery projects will get built or survive.

BUT ITS NOT THAT EASY…

1. Despite Ofgem sending helpful signals to industry and Anesco’s recent Clayhill project there is still a ROC-risk and detailed guidance on co location is not yet available. Maintaining RO accreditation plus any change to the metering set up will trigger a suspension of ROC issuance until it is agreed by Ofgem should be front of every developer’s mind

2. Ofgem’s main concern is the mingling of brown import / export power for the battery with the green export power from the renewable asset. Any metering solution has to address this concern but given a lack of a pre accreditation process there is no certainty until it is built.

3. Existing finance providers and PPA providers are reluctant to allow battery development due to the risk to the RO accreditation. Existing land leases will need to be renegotiated.

4. Splitting the output from the battery and the asset between two parties is difficult under the same MPAN meter.

5. Plus of course getting project finance for any battery project is difficult enough without the added complication of co location.

WHAT WE CAN OFFER

• Keen to talk to people wishing to earn additional revenue through a Vattenfall co-located battery

• We have a niche position as industry leaders on co locating at renewable sites

• In house expertise in complexities of metering arrangements at RO accredited sites

• Proven track record in project management and delivery as demonstrated through PyC and Alexia (NL)

• We can offer flexible solutions on project financing and ownership structure as well as on PPA’s and site supply through our trading arm.

Every co located project is different and we are happy to offer a quick assessment as to the suitability of co location at your site

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Jake Dunn Chris Angell

E-Mail: jake.dunn@vattenfall.com

Email: christopher.angell@vattenfall.com

Thanks for your Attention, any questions?