Tolling agreements and the wider market impacts with Ben Guest (Managing Director, New Energy & Fund Manager @ Gresham House Energy Storage Fund)

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Jul 4, 2024

Ben Guest, Managing Director of New Energy & Fund Manager at Gresham House Energy Storage Fund, discusses the groundbreaking tolling agreement with Octopus Energy. They cover the deal specifics, market impacts, operational strategies, and future outlook for Gresham House. The conversation delves into the evolving role of batteries in the energy market and the challenges and opportunities in the battery storage sector.

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INSIGHT

Utilities Will Pay For Hedging Value

Utilities value the hedge of predictable battery capacity and may pay a premium beyond merchant market revenues, creating room for tolling fees.
Ben infers that this incremental hedging value is separate from asset merchant value and enables win‑win pricing.

ADVICE

Contract Availability Should Mirror Long Term PPAs

Include standard availability and allowance clauses in tolling contracts similar to long‑term PPAs to account for maintenance and network outages.
Ben confirms contracts have technical availability limits and an allowance for downtime, so expectations are realistic.

INSIGHT

Tolling Premiums Can Be A Small Retail Cost

Utilities can value tolling by comparing merchant revenue X and paying a small premium per MWh as the cost of hedging, which may be modest relative to retail price volatility.
Ben models the premium divided by hours/year to show the incremental cost can be pennies per kWh.

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The recent announcement of Gresham House Energy Storage Fund's tolling agreement with Octopus Energy represents a significant milestone in the battery storage industry. This agreement, which offers a fixed price for battery usage over two years, is poised to reshape the market. Ben Guest, Managing Director of New Energy & Fund Manager at Gresham House Energy Storage Fund, joins Quentin in today's episode to delve into this groundbreaking deal.

Their conversation explores the rationale behind the agreement, examining both the technical and financial aspects, as well as its broader implications for the energy market and the evolving role of batteries within it.

This tolling agreement involves approximately half of Gresham House's BESS portfolio in partnership with the UK's largest energy supplier, Octopus Energy. During their conversation, Quentin and Ben cover:

The specifics of the landmark tolling agreement with Octopus Energy.
The impact on the market, including changes in the business case for batteries.
The anticipated changes in Gresham House's operational strategies.
Ben's insights on the current state of the market.
The future outlook for Gresham House Energy Storage Fund.

About our guest

Gresham House is a specialist alternative asset manager, offering funds, direct investments and tailored opportunities to a wide range of investors. Dedicated to sustainable investments with expertise in forestry, sustainable infrastructure, natural capital, renewable energy and battery storage, affordable housing and public and private equity. For more information, head to their site.

About Modo Energy

Modo Energy provides benchmarking, forecasts, data, and insights for new energy assets - all in one place.

Built for analysts, Modo helps the owners, operators, builders, and financiers of battery energy storage solutions understand the market - and make the most out of their assets. Modo’s paid plans serve more than 80% of battery storage owners and operators in Great Britain and ERCOT.

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