Podcast: Battery storage market realities with Ed Porter, Modo Energy

00:02:07 – 00:02:16 – Catherine Cleary

Hello and welcome to another episode of Roadnight Taylor’s Connectology® podcast, I am Catherine Cleary, and I am delighted to be joined by Ed Porter from Modo Energy, so hi Ed.

00:02:17 – 00:02:18 – Ed Porter

Catherine, thank you very much for having me.

00:02:19 – 00:02:28 – Catherine Cleary

We are going to do a bit of a special on battery storage today, which obviously Modo does a huge amount of sort of analysis on. I think is your job title, VP of Insights?

00:02:29 – 00:03:05 – Ed Porter

Yeah, that’s true, so always looking for insights! I think maybe the interesting part about that is as a company that as a company that originally started in Birmingham, now in London, but we are very much looking across many markets, so active I would say probably around 15 different regions all across the US, UK, Europe as well as Australia. So, it is actually one of the real perks of the job is learning how all of these systems work and being able to say ‘hey this works really well in GB’, or this is working really well in SPB, or in the US and let’s try and bring that out and put it into another region – that is one of the things that I really enjoy!

00:03:06 – 00:03:22 – Catherine Cleary

Sounds fantastic, I mean we are very grateful to have you here and sharing some insights today.

And I suppose a lot of people will know you as sort of the face of the Transmission Podcast, but Modo Energy yourselves, I mean you are basically data, data, data, data, data, really. Talk to us a bit about what you actually kind of do as a team.

00:03:23 – 00:04:56 – Ed Porter

Absolutely, so we are not a consultancy, right. So, we spend all of our time looking at data, as you say, looking for those key trends and we use that to kind of do three things. So, we track how much money assets make in the market today, so we are looking at half hour by half hour basis across multiple markets to say: ‘okay, this asset made this much money’ – we think that is really important, so you can kind of track any kind of asset in the GB indices. We also then build forecasts, so how much money will those assets make in the future and that’s to help people make investment decisions, so should they build a 50 megawatt, 500 megwatt, 1 gigawatt assets, should it be 1, 2 ,4 hours and where in the country should it be? And when I’m negotiating all of my terms, should I try and get one and a half cycles, two cycles, all of those things, they all require data to make good decisions. So that, the forecasting part is another huge part of the business.

And then onto my section, which is research, so essentially, we are looking for key trends that people need to know to make good, de-risked decisions about investing into battery storage. We are also looking at solar and wind in terms of co-location with that battery storage too. So, that third one is my area, so I know the most about it. But those are the kind of the two buckets that we look at.

You also mentioned Transmission, it would be reminiscent of me to not talk about it, so that is the podcast where we try and bring through really interesting thought-leaders in energy to come on and talk about the things that we think should be platformed. So that is why you have been on as a guest before. But you know, if you get the chance to, then check that out because it’s on YouTube etc. and you can take a look through and pick out an episode that you think that sounds interesting.

00:04:57 – 00:05:26 – Catherine Cleary

Yeah, and I mean I was just saying beforehand, you know, actually I feel like I have learned so much by watching some of those Transmission episodes, so you know, both about markets that we know nothing about because you cover Australia, the US, you know really quite different markets, and also stuff in GB actually where you know, you’ve got some incredible, really insightful guests, so I definitely second that.

So, I guess, we thought we are sort of talking about battery storage today, and I think the first thing that we thought is that it would be quite good to have a bit of an update as to where we are in the market today, what does the market for battery storage look like kind of in 2025?

00:05:27 – 00:06:34 – Ed Porter

Yes, so I’ll try and put this into kind of three buckets, and I’ll probably start of with scale. If you go back ten years, a lot of the batteries that were on the system were in sort of single digit megawatt type size and that was big for the time. If you now look at some of the biggest sites going around in the system, so if you kind of go to sort of California, you’ve got The Edwards Sanbornthat’s nearly a gig and over three gigawatt hours right, so pretty large sites. Then you’ve got things like Fidra’s project at Thorpe Marsh, which is going live in 2027 – that is 1.4 gigs, 2.8 gigawatt hours, you’ve got multiple projects in the UK and Germany that are 1 gigawatt, 4 gigawatt hours.

And so, the point of sort of saying all of that, is that we have gone from having like a blue print of single digit megawatts to having single digit gigawatts in about ten years; so there’s been a thousand times increase in the size of the thing that we want to build. There’s also another great stat from someone we really admire, so the Rho Motion, they talked about there being 550 gigawatt hours of battery cells produced in 2025.

00:06:35 – 00:06:37 – Catherine Cleary

Wow. Worldwide?

00:06:38 – 00:07:31 – Ed Porter

Worldwide this is, yeah. Sometimes we get asked things, so for example in the MACSE auction that happened in Italy, there is sort of 10 gigawatt hours of battery going into that system. Some people are almost going ‘oh gosh is this system almost going to creak at the seams to deliver that?’ and in some ways, delivering that into Italy specifically yes it will but in the global context with how many cells that have been produced, absolutely not.

And we see that reflected in the numbers, so if we look at California, so the market that we are active in; it’s about 15 gigawatts of batteries that are live and that’s around 50-55 gigawatt hours, GB is about 6 gigawatts, of which is getting to 10 gigawatt hours in terms of duration – I think it’s just over 10 gigawatt hours. ERCOP, is I think over 20 gigawatt hours. And so really, we are seeing these big scales coming through in the space, so that’s kind of point one – if you’re thinking about the battery system as a whole, scale is one of the big things that is changing quite a lot.

00:07:32 – 00:08:00 –  Catherine Cleary

Yeah, and I think that that’s quite useful to reflect, because in some ways perhaps in the grid world we see the ambitions constantly go up, and up and up, and you know sometimes that can be driven from a purely financial rather than engineering, you know well if I am going to pay this much for my grid connection, can I max it out, can I build the biggest thing possible? It sounds weird sitting here as engineers saying bigger isn’t necessarily better; but you know in the battery world, that has proved to be the case from a kind of financial perspective, that those who can pull off really big schemes, there is a market attraction to do so.

00:08:01 – 00:08:13 – Ed Porter

Definitely, you can do it all in one go. So, there are definitely benefits to looking at some of those bigger sites, we also see there are some sort of traditional rules that exist in things like balancing code, which I admit isn’t very exciting.

00:08:14 – 00:08:16 – Catherine Cleary

No, no, no, we love code!

00:08:17 – 00:08:45 –- Ed Porter

I am going to have to be very careful here, but there are some balancing codes, it is a little bit dry. But, there are some that limit how some larger units can operate, for me, I think that will probably change, I think we will probably look at reforming some of that and really, where that will come from is how can we get the most out of these systems that we are installing, does it make sense to have a semi-antiquated rule in place to limit how some of these assets can trade – no I don’t think so. I don’t think consumers should have to pay for us having old rules, so I am a big fan of codes, but a big fan of codes that are up to date.

00:08:46 – 00:08:56 – Catherine Cleary

Yeah, okay that sounds good. Okay, so we’ve had growth in sort of terms of like the scale, any other trends in terms of the scale of how batteries are used and services that they access?

00:08:57 – 00:11:54 – Ed Porter

Yes, definitely. I think we should talk about maturity. This isn’t talking about scale, this is kind of how they are being used. So the first thing to say is, when batteries come onto our system, because they react very quickly, the first thing that they do is often frequency response, so depending on which grid you are in, you try and keep grid, lets say grid frequency at 50Hertz, as frequency moves around that, essentially batteries act like a rubber band to bring that frequency back to 50Hertz – that is essentially one of the ancillary services that they do and one of the first things that batteries do in nearly all markets.

The great news for consumers is that used to cost quite a lot of money to get gas to do that, because it is quite expensive to get these big thermal units to react really quickly.  So, batteries coming in and doing that has been a significant cost reduction for consumers, and it also puts less wear and tear on gas. So they don’t have to run a, the way they used to do it was that they used to, instead of running it at their maximum power, they kind of sort of like half go on the throttle essentially, and then have flexibility to go around; now they don’t need to do that, they can run at full whack if they really want to, and so that obviously has efficiency benefits for them.

Batteries are coming in and done those frequency response markets, if I just take GB as an example, we need about 2 gigs to do frequency response, we’ve now got 6; so that market is now, what we would call saturated. So, then batteries then go and look for the next most interesting thing. That next most interesting thing is wholesale trading, so buying low when energy is cheap and then selling when energy is high. Again, that’s kind of good for two things. So, one it would kind of help us get more from let’s say excess solar, or excess wind, and it also helps us reduce the sort of peak stress on the system. So essentially perhaps to stretch the analogy of the elastic band, it’s then trying to bring those prices closer to each other for time.

The reason why this is kind of a maturity thing is that in those first instances when you come into a small market, like ancillary services, you can get kind of revenue levels that bounce around quite a lot, and often you get paid quite a lot to sort of displace gas in those first instances, actually as we move into wholesale trading that’s a much more mature market with much more depth. And so, it’s something that big investors can get more confident in, so we are going from those early megawatts where it was evangelist and enthusiast building batteries, now going into this world where those groups don’t quite have the depth of pockets to build out some of these units. So, we are seeing big utilities coming into this space, big institutional investors, national wealth funds coming in to take on some of these projects. And they are not sort of talking in sort of hundred thousand there, and a hundred thousand there, it is okay, we’ve got half a billion to deploy. So, we look, just to give you sort of the rough numbers of that, so we think we need about 50 gigs of batteries in GB by 2050, that’s about 25 billion – enthusiast and evangelists don’t have that, but big infrastructure capital does. And so that’s another kind of key trend that we are seeing, which is the sort of people providing the oil, that greases the wheels of this are moving towards those bigger institutions and more mature players.

00:11:55 – 00:12:20 – Catherine Cleary

And is that, I mean because it is probably fair to say I mean perhaps from a kind of external perspective, we’d almost seen batteries have a bit of a rocky road, perhaps transitioning from actually you know, I want a you know, I just want to do frequency response, or you know, I‘m very focused on these ancillary services, you know are those prices coming down, and people sort of thinking well actually, okay what am I going to build my battery project to do, you know what is my revenue? Has that now stabilised, is that what you are effectively seeing?

00:12:21 – 00:13:02- Ed Porter

Yeah, exactly, and really, it’s now sort of on an upward trend. Mostly, that upward trend is being driven by fewer gas run hours, more solar, more wind creating negative prices, or zero-pound price intervals. And it’s also things like technological updates in control rooms, so making sure that we are essentially getting the most out of the flexibility which we have, to give the example in GB, there’s something called the opening balancing program, which runs for four years and it’s essentially a long program of trying to get more out of those battery systems; that is on it’s way, it is partially successful, I think NESO, our system operator, would say that it’s not fully successful and there is still more work to do – and that’s great, that’s exactly the work that we should be doing.

00:13:03 – 00:13:12 – Catherine Cleary

Yeah, to make sure that the assets that they are actually built are utilised, right? Because if I pay my bills, I want to make sure that the control room actually made the most cost-effective decision, as opposed to perhaps historically the easy one.

00:13:13 – 00:13:31 – Ed Porter

Exactly, so we are definitely moving in the right direction, and to tie this all back in, I think that if you are now an institutional investor, you can get a lot of confidence that the system operator is moving in the right direction, things are very transparent, and we are now starting to see those improvements and remedies coming through. So, again that’s sort of part of the reason that the whole sector is maturing.

00:13:32 – 00:13:37 – Catherine Cleary

Okay, and then I suppose one of the things that I am quite interested in, in fact is that everything, a good overview as to where we are now?

00:13:38 – 00:13:39 – Ed Porter

I think I’d add one more thing.

00:13:40 – 00:13:40 – Catherine Cleary

Go for it.

00:13:41 – 00:14:22 –  Ed Porter

This is like a pet gripe that everything in energy world gets a little bit subsidised and so we have capacity market contracts for gas units mostly, we have contracts for difference for renewables, and we also have renewable obligation and feed in tariff as well – so, all subsidy schemes, and sometimes when we talk about batteries publicly, someone says ‘ah you’re just mining for subsidies’. And so, I looked up the numbers the other day, just for a reference point, so I think I went back to 2014, I went looked at the subsidies given to wind, solar, gas and batteries – essentially anything that has been subsidised by these main schemes.  What percentage, ah this is an unfair question. What percentage do you think batteries are, of that subsidy?

00:14:23 – 00:14:27 – Catherine Cleary

Well, I suppose batteries would have really only just gone into kind of the capacity market, 2%?

00:14:28 – 00:14:52 – Ed Porter

I think that is an excellent guess. So, 0.5% of subsidy has gone to batteries. And I think that is perhaps misleading because batteries really only started to scale up in the last few years.  But just to really highlight, there’s a lot of money going to gas, there’s a lot of money going to, solar and wind. But actually, to the, the thing that is really driving, like how we do flexibility properly is not actually getting a subsidy payment really at all.

00:14:53 – 00:14:56 – Catherine Cleary

Okay. So yeah, so it is really quite an efficient solution.

00:14:57 – 00:15:02 – Ed Porter

Yeah, and we see that coming through in terms of then low cost of bills, right. So that’s, that’s why we get very excited about it.

00:15:03 – 00:15:33 – Catherine Cleary

Fantastic, and so I wanted to then say because that does seem like quite a nice rosy position to be in. But you know, I suppose there are some pretty big changes coming forward. So, you know, we’ve got, we talk lots about Connections Reform at the moment on this podcast. And I guess one of the really headline items in Connection Reform was that we have a very, very large queue of batteries. You know, NESO’s numbers when they came out with what they thought was needed for kind of the strategic alignment for Clean Power 2030 said, we really don’t think we need a lot of those numbers. I mean, out of interest, do you agree with those sorts of?

00:15:34 – 00:15:35 – Ed Porter

We have a different number.

00:15:36 – 00:15:56 – Catherine Cleary

Okay. So, but effectively what we think that’s going to mean is that there are a lot of battery projects that are not going to get a kind of a Gate 2 connection offer. So, we might see the pipeline of battery projects reduce, and I’m really interested in, you know, does Modo kind of, are you modelling that at the moment? Are you thinking whether that’s going to, is it going to increase the value of the remaining project?

00:15:57 – 00:16:41 – Ed Porter

So, we’re so definitely we see this, right? So, the projects that are going through that Gate 2 process and are protected, the 26 and 27 projects, we think those are definitely very valuable. If you then have projects which are in regions where it’s not that oversupplied, but NESO and the Clean Power 2030 plan indicates that you need projects in those regions. Again, you should feel quite confident.

I would really sort of flag to people that if you are, if there’s say a need for, say, five gigawatts of batteries in that region and you are the 10th gigawatt of battery in that region, I would, that there should be a warning sign going on that actually, even though yes, we need more batteries, there’s a very large potential that you could get given a very long date for your connection.

00:16:42 – 00:16:43- Catherine Cleary

Even if you’re protected?

00:16:44 – 00:17:39 – Ed Porter

Even if you’re protected, right? And so, there is going to be this, in the start of next year when people start to get connection offers coming through, and that will take about six months. And I had always hate to put a date on a sort of a thing which is kind of centrally governed because without fail it will get expanded. But the point is that some of those sites will hold their value really well, and some will be worth not very much and so that was even sort of explicitly written in the impact assessment of the work in Connections Reform, that a lot of the development would essentially be wiped off in terms of value.

And so, there is this kind of rocky road coming ahead for some of those groups now on the whole for GB. I think some of those sites might then get picked up with people who want to take on a little bit of risk. And maybe this is kind of where I’ll come back to your question around the forecast. So Clean Power 2030 asks for something like 27 gigs in the top end of storage.

00:17:40 – 00:17:42 – Catherine Cleary

Including what we currently have; so that includes that, you know, the six we currently got?

00:17:43 – 00:20:53 – Ed Porter

Yeah, absolutely. Which we think is really ambitious by 2030, but all of the stuff in Clean Power 2030 is really ambitious. So, we don’t think we’re going to get to that number of 27 gigs by 2030 and that’s no problem. Like it’s really ambitious. We think we’ll get sort of on, on the way to it – so, around the 20-gig number, what’s really interesting about the sort of the Connections Reform and the Strategic Spatial Energy Plan, that sort of is the thing that follows it, is that they don’t see a huge amount of additional batteries coming on. So, this is some, but we’re sort of early thirties possibly, and we are sort of torn between two things.

One hand we say – the central planning authorities are correct and they know everything. They are sort of omnipotent, and we must always trust them and therefore the number will be whatever they say – that’s one way of forecasting. Another way of forecasting is to say, we are going to look at the markets and we’re going to look at the shape of power prices, and we’re going to look at what we think batteries cost, and we’re going to say, well, look, if this battery makes enough money to get an investor excited, are people going to want to build it? Generally speaking, if that battery is making enough money to get an investor excited, it’s doing that because it is kicking other things out of the market. So, it’s undercutting a gas unit, or it is being the most, is the best place to put your energy in the middle of the day. And so, when we do that maths, we get to a number that’s more like 55 gigawatts of batteries on the system – that is not huge in the context of what China can produce and what gets produced globally; but it is a big increase from where we are in connections reform and SSEP.

And I think the one thing I would say about this is that I would probably welcome that. So, this is a totally unfair stat, but I’m going to say it anyway, if you go back in time and look at some of the FES, so the future energy scenario modelling that is done, this is, oh, not, this isn’t central planning, but this is essentially a view from a central body in terms of what that might look like. In some scenarios you have things like, coal and CCS, so carbon capture storage on coal that from those plans in say, 2015, should have gone live, that coal CCS should have gone live in 2025. And the reality is we’ve closed coal and no CCS is really there.

So, that, it sounds, sounds like a bad stat actually, I think that is the system working really, really well, which is, I hope that in Connections Reform and in SSEP there is a willingness to recognize that you don’t have all of the stats and that you are almost certainly wrong with what you’re putting onto the system that should be absolutely welcomed. The worst case would be no, no, we’re absolutely right, we’re definitely going to be correct. The best case would be, we know this is going to be wrong and so we’re happy to build in some attrition. We’re happy to move around pots. If we say that we’re going to get 10 gigs of technology X and actually that technology X doesn’t turn up, okay, we’ve got this technology Y that is sort of getting to its limits and is actually delivering and is doing a really good job. So, we are going to sort of tweak our numbers a little bit and have some flexibility. So, I really hope that SSEP takes that into account. And then tying that back into the point around some sites not being worth very much. I do think some sites will initially not be worth very much, but if this does come to pass that people change where the volumes are and how much we want of certain technologies, then some of those sites will have some enduring value.

00:20:54 – 00:21:17- Catherine Cleary

Yeah, okay and I think that’s I suppose, and we see that kind of in a lot of the discussions around, you know, how Connections Reform and the new kind of gated grid process might work in the future, right? So, we are acknowledging there are going to be some hurdles people have to pass and we want to make sure that the door isn’t just closed to technologies.

We don’t want investors sat the other side of that door saying, I’d really love to build this battery project. I think it would make me money, but I can’t physically get a grid connection.

00:21:31 – 00:22:03 – Ed Porter

I had a question for you on Connections Reform, and this is, so we see a lot of it sort of being squeezed into the start of next year, right? So we’ve got, a lot of these connection offers should come out, early next year. I think at that point there’s going to be this real sort of wave of projects that are all trying to get things accelerated all at the same time. Do you think that that is going to be a successful process and given that some of those connection offers then come with capital requirements, do you think that people are actually sort of aware that they’ve got these kinds of big cash bills coming, coming through?

00:22:04 – 00:23:14 – Catherine Cleary

Yeah, I think that’s a really pertinent, question because actually over the last couple of months, I think two realizations have hit one. Some of those offers are landing much later than people were hoping they would. So, we’ve seen a delay of the program and what that really does is it, it concertinas everything up. So actually, projects with 2026 connection dates, 2027 connection dates, you know, they have been sat on ice, you know, they haven’t been able to make investment decisions, procure equipment. So, they might be getting an offer, which, you know, they’ll almost certainly be accepting, but they’re still looking at it and thinking, I can’t make that date anymore. So actually, there’s going to need to be a sort of, a bit of a rationalization process. And I think we really, well, you know, just in the last sort of week or so, NESO and the TOs have, have really said, actually we’ve now begun to open our eyes to this and we’re going to have to have pragmatic conversations about connection dates and things. And that’s good. But what it means actually is that some of those projects will roll on to 2028, even 2029.  And we are now again, that concertina effect, you know, we’re bunching up, we’re potentially sort of stealing some of the resource, commissioning resource from 2028, 2029 projects. So, I think, you know, no one likes the idea that you’re going to have a mass build out of everything needed for 2030, in 2029 and 2030 that, that doesn’t really…

00:23:15 – 00:23:19 – Ed Porter

And what about the cash side? What about the potential for large liabilities to sort of come June?

00:23:20 – 00:24:43 – Catherine Cleary

I think that is also people are more aware of that. Because I think, you know, the grid kind of securities and grid liabilities have been frozen for a long time. You know, we’ve had like quite a lot of recent discussion about when they’re going to become unfrozen and there’s, there is now clarity. They will become unfrozen when you get your Gate 2 offer. So, accepting that you’re going to be sort of paying on the bottom line. There are a few people who are going to have, you know, really bad news stories, and those are people whose, connection dates have been moved forward but aren’t achievable, but they are, they will be asked to be signing on the bottom line of a liability based on a connection date imminently. So, liabilities ramp up as you get close to your connection dates, so that could be quite problematic.

And then customers who have kind of hybrid sites with different technologies, including final demand, demand has very different liabilities, much higher. So, people who are looking at data centers, for example, they were all hoping there’s a Code Modification coming through to rationalize those charges in line with generation. They were all hoping that would be done and dusted by the time they got the Gate 2 offer. And to give you an idea, you know, typically speaking, you know, liabilities upon acceptance of an offer, you know, even if you’re only a couple of years out, don’t tend to be more than sort of, you know, 10 million pounds – for a demand customer that could be hundreds. Okay. You know, so, so sometimes it is a bonkers number and yeah, those issues won’t be fixed when Gate 2 offers come out. So yeah, there will be some people who are sitting there with an offer they would like to accept and are financially unable to potentially.

00:24:44 – 00:24:48 – Ed Porter

Okay, very interesting. And let me quote a Connectology, episode back to you, which is there are more, there’s more accepted offers in the demand side than there is peak demand on the system today.

00:24:49 – 00:24:56 – Catherine Cleary

Yeah, by almost a factor of two.

00:24:57 – 00:24:58 – Ed Porter

That’s just a crazy stat.

00:24:59 – 00:25:16 – Catherine Cleary

Yeah. I think it’s, you know, I think there is a real, there’s been a letter out, well, I guess we don’t want to send this into demand podcast, but there’s been a letter out from Ofgem, just reflecting that this week, you know, that actually we potentially need some kind of needed test associated with demand as well, because that, that queue is unrealistic.

00:25:17 – 00:25:22 – Ed Porter

Agree, but the system is desperate for demand. So, like this, this solves like we were, we’re going off on a huge tangent here.

00:25:23 – 00:25:48 – Catherine Cleary

Tangents are creative! It’s good! Go for it Ed!

00:25:49 – 00:26:22 – Ed Porter

Of course, of course. But the system really needs demand. Like we are, when we thinking about the cost of interest in this country to the ability to smooth out levies and costs of network. Over more demand will be a massive help.

The opposite, and this maybe gives it away is the sort of utility death spiral, right? Which is the concept that essentially you try and recover the costs of a system or a utility over a diminishing demand portion. Costs get higher and higher and higher, which gives more incentives for people to leave the network. So, the opposite of the Death spiral is what we’re trying to get to, which should be quite obvious that it’s a better place.

00:26:23 – 00:26:26 – Catherine Cleary

And the Death Spiral was a term specifically coined in Australia, wasn’t it? I think for…

00:26:27 – 00:26:28 – Ed Porter

Yeah, I think so.

00:26:29 – 00:27:13 – Catherine Cleary

Yeah, for sort of network charging. Okay, so I suppose like the, I think there is a bit of a rocky road ahead, and it’s not totally clear how that will pan out for sort of Gate 2 schemes going forward.

Some of them absolutely, you know, will be given the kind of good news they’re after. They’ll be in a position to kind of crack on. And I think for those projects, I’m quite interested to know – are those projects going to look the same as the battery projects we’re building now? Because I guess from a technical perspective, there are kind of a few things changing at the moment. We’ve seen, I think, Zeno’s Black Hillock scheme, for example, as one of the first grid forming converters, we’ve seen kind of NESO be quite vocal about the fact that they would like kind of grid forming capability potentially to be mandatory. Is that something you are, you are kind of modelling as well because it opens up new services?

00:27:14 – 00:28:00 – Ed Porter

Yeah. Well, I mean that, that Zenobē project where got into a time magazine innovation of the year. So clearly, it’s going in the right direction. Definitely we like to see more grid forming inverters coming through. It feels odd. I’m a battery person sort of first and foremost. And when I talk about sort of the capabilities of grid forming side, really, I’m not actually sort of hyping up batteries at all. I’m actually really just hyping up the inverter technology, and so this always feels quite odd, but certainly we expect to see more grid forming inverters coming through when we look at weaker grids globally, (and so that’s one of the nice things about my job is we kind of, we have that breadth), when we look at, global systems, for example, Australia; the number of grid forming inverters coming through is getting to sort of 50/50 with the grid following inverters.

00:28:01 – 00:28:02 – Catherine Cleary

Interesting. Okay. So, we are not quite there yet.

00:28:03 – 00:29:06- Ed Porter

We’re absolutely not there yet. So, I would say historically it’s all been grid following inverters; so, they essentially will do, as the name suggests, they will follow what the grid does, and so they will try and replicate everything that comes through.

In weaker grids it’s nice to have the sort of grid forming potential and so you can then be setting a voltage level. So, if you’ve got a voltage problem that exists on your system, then a grid forming inverter will be better for that.

A grid following inverter can do a little bit, but not as much as a grid forming inverter. And so, if we, so that’s very useful for Australia, which has a weak grid because it has a lot of solar and it is massive.  If we look at grids like, Spain, Spain have gone from not very much solar, let’s say 5 gigs to about 35 gigs in the last few years, and they have not really made any progress on the storage side. So, on the storage side, they’ve got, they them, their storage is in the sort of tens of megawatts.  And that’s the kind of classic case of – they’ve moved forward very quickly, which is to be admired, but you also have to think about system stability at the same time. And so, things like grid forming inverters on Spain is something that I think we should be very excited about.

00:29:07 – 00:29:46 – Catherine Cleary

Yeah. Okay. And, and I suppose from a, not just a kind of, I guess, you know, it’s lovely to do this out the goodness of our hearts and supporting great, you know, great grids. But I, I think, you know, from a commercial perspective that kind of revenue stability is quite key.

So obviously in the UK we’ve got NESOs kind of you know, they’ve got that kind of long term, framework for stability services, for example, coming out now. Are there any other markets which offer alternatives? So, I guess in stability we sort of break down into kind of like inertia, so synthetic inertia, you know, short circuit level contribution, and restoration services, you know, black start of old. Are there kind of equal appetites from, from best participants for all three?

00:29:47 – 00:31:39 – Ed Porter

Yeah, I would say there’s a bit of a word of warning here. The first thing to say is that there’s a really nice story within this, which is if you want to be providing say, like an inertia type service, we had, Daniel Duckwitz, who was one of the engineers who works with SMA – SMA make inverters following and, and forming. And he was talking about sort of what the drain was on a battery when you were trying to provide an inertia type service. And that is sort of, people think that, oh, that’s going to be a big energy drain; you’re going to have to load, use lots of your capacity to provide that service. In reality, if you want to respond to an event, it’s two and a half to five seconds worth of that battery’s energy, which is nothing.

So, the nice part of the story is that essentially you could have a battery sat there at zero megawatts and as provided you’ve got some small portion of energy left, you can kind of always be providing that service and that’s really nice.

I think the word warning that I would give to people is that. This isn’t a new considerer of, additional value that’s going to come flooding through. So, when we look at these contracts, we look at the pathfinders, it’s not like you’re getting paid, a huge amount of money. And maybe I’ll just kind of put this into context. So, if you want to build a new battery today, a two-hour battery, maybe you’re looking at 400k per megawatt, to build the thing. And so, you’re trying to get revenues of say, 80, 90k per megawatt per year in order to pay for that; so that sort of pays for the financing as well. For things like inertia, the early contracts, looking at those services have been paying something like 10K per megawatt per year, or for other services like voltage, it might even be lower than that.

And so it’s very, very unlikely that people will be building these units only for the purpose of inertia or voltage. Now, the great news is that storage can stack things and so what storage assets will try and do is, is kind of stack these, these products together. I think the reason why I say that is because sometimes you see these things where people talk about, oh, I’m going to build this thing for the purpose of just stability alone. And I would just say, well, yes, maybe. But then, and, and yes, sorry, the energy aspect works and the engineering works, but the commercials might be very difficult, and so I’d kind of always caution people to look at that.

00:31:40 – 00:32:12 –Catherine Cleary

I think that’s, and that’s really, I mean, great numbers and also really useful. Perhaps, it paints a bit of a picture as to why we’re currently where we are in terms of there not being a huge amount of grid forming inverters in the UK. Because, I mean, I would say from a technical grid engineering perspective, there is a barrier there. You know, there is additional work to do to both specify that inverter to actually kind of test and prove its grid forming capabilities. And then the compliance process itself, is again, quite, quite a lot more onerous. So, are you, are you making back your, you know, is that 10K per year actually washing its face on that additional effort?

00:32:13 – 00:33:22 – Ed Porter

So, I would say that is exactly right. So, the cost of a grid forming inverter versus a grid following inverter is not that different in terms of the manufacturing process.

Where the grid forming becomes more expensive is in the additional testing and work you have to do with grid to essentially make sure that that thing is doing what it’s supposed to be doing. And so, the additional cost on the inverter side is pretty minimal, so I think we are getting to this place where we’re definitely going to have many more grid forming inverters.

I think what I would say is that the best thing that could come out of, NESO or any other system operator, globally would be – what do we actually need? So how in what locations do we need voltage? Do we need, short circuit level or short circuit current? In what locations do we need kind of reactive power? If those things get really well described, it’s then very easy for people to then say, okay, I’ve got a battery coming through. I can make a decision on good forming or good following; I could look at a synchronous compensator if I wanted to. There’s kind of lots of options as soon as the market is transparent and says what it actually needs, then we can start planning for that. That’s really the, I think a really, when we see this done well, I think that will be at the heart of it.

00:33:23 – 00:33:54 – Catherine Cleary

Yeah. Okay. And, and I suppose that’s in the kind of current world where it is still a user choice, you know, you could go still go grid following. And I suppose, I think I’m thinking a few years ahead, if we have end up with a system operator that says, actually I just want to mandate everything to be grid forming, then perhaps there’s a kind of a shared obligation to try and lower that bar. Therefore, for things like performance testing and, and sort of acceptance testing, hopefully, perhaps we can bring in some type testing for grid forming inverters that would, that would lower the effort levels required. Otherwise, we’d just increasing the cost of storage for everyone.

00:33:55 – 00:34:09 – Ed Porter

Yeah. You don’t necessarily have to all have grid forming inverters, right? So, if your grid is strong, it might make sense to have a blend of grid forming, grid following. It’s not like this is the new technology that’s going to solve everything, but it’s just it is a good step forward and we should make the most of it.

00:34:10 – 00:34:47 – Catherine Cleary

It sounds like we maybe need a Modo Energy person on a grid work group for that Code Modification. I suppose, I mean, are there other that, that’s probably a couple of years off. You know, maybe in terms of implementation, I know it’s kind of the direction travel and NESO have sort of set themselves.

There’ve been quite a number of sort of code changes, not such, such drastic ones, but code changes over the last few years aimed at batteries, either from a kind of technology side or an operation side. I think I’d asked you beforehand, Ed whether you could do me sort of like some quick idiot guide summaries, to things like, GC0166, which well, in fact, I’m just going to ask you what it is?

00:34:48 – 00:35:47- Ed Porter

Yeah, yeah, of course. So, this is essentially, this actually isn’t the first time we’ve looked at this. So, the way that batteries used to work is that in the balancing mechanism, which is that sort of last hour before delivery, they would submit, essentially their power to provide charging or discharging for 15 minutes, maximum of 15 minutes.

Then we say, that’s probably not a very good idea because batteries are like two hours in duration. So why are we asking him for 15 minutes only? So, we changed that 15-minute rule to a 30-minute rule. Exciting change. And so, we go to 30-minute rules and then batteries can be dispatched up to 30-minute rules.

So now when you put a battery into the balancing mechanism, you have to say, this is the power that I can hold for 30 minutes. Fine. But if you haven’t got very much energy left in your battery, you can’t put in a very high offer because you can’t hold that for 30 minutes. And so, what GC166 is doing is saying, well, actually, why don’t you just tell us how much energy you’ve got or the amount of discharge that you can provide, or the amount of charge that you can provide. And once you’ve given us that, then we NESO, we can just work out.

00:35:48 – 00:36:06- Catherine Cleary

We can do the maths.

00:36:07 – 00:36:48- Ed Porter

We can just do the maths. And that maths is not hard. The system, the integrating into a system is really hard. So, we’ve had the Ofgem decision, Ofgem have approved this, so it’s going to go ahead. We’ve got something like 10 sites or optimizers that are going to be tested near term. And I think in a year’s time we are then going to have it working, provided everything’s going well, we’re then go we are have it sort of fully working.

If you’ve been able to follow what I’ve just said, like it’s very simple. Essentially, we’re going as a battery. If I’m a battery, I’m just telling you whether I can charge or discharge and how much for like that. It can’t be hard maths, but it’s the integration into the system and making sure that it’s working well with all of those NESO processes – that’s the hard part.

00:36:49 – 00:37:25 – Catherine Cleary

And I guess what I was intrigued at was, is that going to change how batteries actually operate? Because perhaps, you know, when we look at profiles of seeing how batteries operate, perhaps particularly sort of embedded batteries, so smaller scale batteries and distribution networks. You know, we do see some fairly basic charging profiles, which, you know, try and do things like, optimize for the evening peak to allow them to discharge. Is this this is going to change how batteries in the BM operate, but is that going to mean that actually we see less kind of chunky half hour profiles and we start to see more sort of, you know, actually it’s going to do this for five minutes because it could have a BM action that was only asked for, for five minutes.

00:37:26 – 00:38:01- Ed Porter

Yeah, possibly. Possibly. I think the, when people think about power markets, and particularly in the UK, everything’s kind of national single price that is half hour in nature up until you get to the BM and as soon as you get to the BM you get locational pricing that is  effectively modal, and then you get dispatches that can be one minute  long.

And so, you go from kind of the simplistic national version to the engineering and physics reality. And so, the more that we can allow batteries to get into the engineering reality of how our system actually works, the better we can then dispatch those systems.

00:38:02 – 00:38:03 – Catherine Cleary

Yeah. Fantastic. Really interesting to see what happens.

00:38:04 – 00:38:14 – Ed Porter

Yeah.

00:38:15 – 00:38:25 – Catherine Cleary

And so, so yeah. So that was, that was and thank you for satisfying my technical kind of curiosity on that one. I mean, is there anything else coming up you think in the kind of changes for batteries, either grid code or not, you know, perhaps looking forward to next year?

00:38:26 – 00:39:39 – Ed Porter

So, I suppose the cat’s already out the bag in terms of the thing that I quite like is, which is grid forming inverters – I think that’s, that’s a really big change. And I think for some grids that’s going to be a massive change, for example, just meaning that we have to run, maybe I’ll go back a step. In the wide energy transition, a lot of times people get sort of really hung up on looking at how do we get from 95% renewables to a hundred percent renewables?

That’s really hard and that means we have to look at some really odd technologies that’re very expensive, we are not at 95% renewables, so I don’t know why we spend so long looking at it. In fact, if that’s really expensive, we might not even end up doing that and we might end up spending that money in somewhere else that has a better carbon impact. And right now, let’s say we’re at 50% renewables, I’d much rather us look at how do we get from 50 to 65% renewables than look at 90 to 100%. And so, the reason why I’m excited about something like grid forming inverters is that let’s say we’ve got a voltage problem on our network.

Sometimes that means we call on a gas unit to run in the middle of summit when from an energy perspective, we don’t need them at all. But from a voltage perspective, we do need them. Well, if you’ve got grid forming inverters, if we have other things that provide voltage and can stabilize the network, then we don’t need to call on that gas unit for a chunk of time in summer.

Okay. That moves us from 50 to 52%, and so, well I was going to ask, answer this question. So, the thing that I’m really excited about is, is grid forming inverters. And I think that is part of the reason why I think we have a way of running this system better that can move us from 50% to 65%. And I think we should be really focusing as hard as possible on that rather than getting sort of bogged down in the 95 to 100%.

Because for my money, and I don’t think people really like this, but I think we’re going to be running gas for a lot longer than we expected partly cause it’s all paid for upfront. And so, I think we should probably be doing a lot of refurbs of the 35 gigs of gas that we’ve got rather than trying to look for some very expensive solutions.

00:39:40 – 00:40:34 – Catherine Cleary

Okay. Yeah. Well, I mean, I think, I mean, and I think the grid forming piece yeah, we, we definitely see it as kind of key because it’s something that people are going to have to make decisions about now as they procure assets for projects, which aren’t going to get built out until 2027, 2028. So, it does seem like, you know, now is the moment, and I am, for one am going to go and watch your SMA podcast I think, on yeah, exactly what the kind of inverter manufacturer’s take on this is.

00:40:35 – 00:41:45 – Ed Porter

Yeah. I mean obviously they’re bullish on it, right? So…

00:38:15 – 00:38:25- Catherine Cleary

I suppose that’s great. I can then hold them to that later. I can say, hang on a minute, on transmission, you said you could do this.

00:38:26 – 00:41:21- Ed Porter

Yes. Yeah. When you’re having a supply chain conversation, that’s, you can drop that in, I think, but your general question was on the state of batteries. I think, the big thing that has happened in, in the last year and maybe the last 18 months is just the cost decline. So to go into a really boring world of like financial modelling, just very  temporarily, when you can take off something like 20  or 30% of the cost of the system upfront, it matters less what’s going on in the revenue world because essentially the more you can get that cost down in that sort of first investment period, it is much easier to get projects to be over hurdle rates, which is the point at which a financier says, yes, I want to go and  do this.

So as much as I love to talk about the sort of geekery of like niche parts of the network, the blunt sort of force in the battery space has been that cost has just come down relentlessly. And that means that for many of these battery projects, it is a better decision to, to put them onto the system.

And it’s in part, to go back to an earlier part of our conversation, it’s why NESO, it’s really hard for NESO because you’re trying to make this forecast, but actually things aren’t moving in a linear, slow way. Things are actually shifting in a way that not many people predicted, and so actually it would be really good for them to have a sort of constant refresh of where the market is.

00:40:12 – 00:40:34 – Catherine Cleary

Yeah, and I suppose actually it’s something we talk about a lot as well, but you know, these big forecasting exercises, things like SSEP won’t be any different. You know, they take time and therefore they have to freeze their kind of input data assumptions at a point. And we often see the results as an industry maybe a year later, you know, and a lot of things can change in a year, 18 months. So, I suppose that that point about kind of, I guess being transparent about the data assumptions and then refreshing them when they, when they get outdated.

00:40:35 – 00:41:45 – Ed Porter

A hundred percent.  No bad thing to be wrong.

00:41:46 – 00:42:06 – Catherine Cleary

Yeah, okay. Excellent, fantastic! Well, Ed, I think we’ll leave it there. That is an amazing amount of stuff that we’ve managed to cover and unpack, and I think the financial modelling will be very welcomed by lots of listeners as well.

00:42:07 – 00:42:08 – Ed Porter

Oh, it’s exciting stuff.

00:42:09 – 00:42:18 – Catherine Cleary

It’s exciting stuff. Well, apparently, it’s how people get paid. So, thank you very much for coming and we will see you on another episode of the Connectology podcast. Thank you.