Gresham House Energy Storage Fund secures significant fixed price contracts with Octopus Energy

Gresham House Energy Storage Fund plc (LSE: GRID), the leading fund in the UK dedicated to utility-scale battery energy storage systems, has announced a landmark deal with Octopus Energy, the UK’s premier electricity provider. This agreement secures fixed price contracts for approximately half of GRID’s target portfolio, encompassing 568MW/920MWh out of the planned 1,072MW. Starting from July 1, 2024, this phased arrangement marks a pivotal step towards stabilizing GRID’s financial outlook.

Under the terms of the contract, Octopus Energy will pay a predetermined fee per MW for the utilization of the project’s batteries, providing GRID with a reliable revenue stream. This fee excludes Capacity Market payments, which will continue independently, contributing to the company’s expected annual revenues of around £43 million during the contract period.

This strategic agreement is set to cover about 50% of GRID’s portfolio by the end of 2024, enhancing the company’s revenue certainty and enabling a more resilient financial position amidst fluctuating market conditions. The contracted portion is set to receive a higher rate than the recent market lows, underscoring the competitive pricing strategy aligned with battery storage economics.

Kieron Stopforth, Head of Flexibility at Octopus Energy, emphasized the importance of batteries in optimizing the energy system, stating, “Batteries play a key role in unlocking the clean and cheap energy system, storing green energy when it’s plentiful and supplying it when energy prices spike.”

John Leggate CBE, Chair of Gresham House Energy Storage Fund, highlighted the agreement’s balance between contractual stability and the potential for merchant market gains. “This rebalanced mix of contractual and merchant revenues offers shareholders a superior risk-adjusted return and significant risk mitigation,” he explained.

Ben Guest, Fund Manager at GRID, noted the importance of this deal in securing stable revenues above current market levels and in facilitating the strategic diversification of revenue streams. He remarked, “By contracting around 50% of GRID’s portfolio with Octopus, we ensure a steady revenue flow while anticipating improvements in BESS utilisation from the ongoing Balancing Programme by the Electricity System Operator.”

This partnership not only stabilizes GRID’s financial outlook but also supports the broader transition to a renewable energy-based economy, reinforcing the role of battery storage in balancing supply and demand dynamics. As renewable energy generation escalates, such strategic collaborations are poised to play a critical role in delivering sustainable, affordable, and reliable electricity.

The strategic alliance between Gresham House Energy Storage Fund and Octopus Energy represents a forward-thinking approach to energy management in the UK. By leveraging battery storage, this partnership addresses the critical need for grid flexibility amidst increasing renewable energy integration. The contract not only secures a stable revenue stream for GRID but also sets a precedent for future collaborations in the energy sector, potentially guiding other companies towards similar ventures that prioritize economic stability and renewable energy utilization.