BW ESS, Penso Power and Shell sign seven-year fixed-price deal for 330 MWh BESS asset in the UK

BW ESS and Penso Power have signed a seven-year fixed-price contract with Shell Energy Europe Limited, for a 100 MW/330 MWh battery energy storage system (BESS) in the United Kingdom.

The tolling agreement applies to BW ESS and Penso Power’s site in Bramley, England, which is currently under construction and scheduled for commissioning in the fourth quarter of 2024. When it comes online, Shell will trade the Bramley BESS in a range of ancillary services and wholesale markets while paying a fixed price to the project’s developers.

Erik Strømsø, CEO of BW ESS, said the agreement will not only secure long-term revenues for the Bramley site, “but also helps enable the market’s shift away from short-term frequency response towards load shifting.”

The deal follows a period of declining revenues for battery storage assets trading in Great Britain (GB). Research from UK-based consultancy LCP Delta found a 71% decline in average battery storage profits in 2023, compared to the highs of 2021 and 2022. Volatility has continued into 2024 – the latest data from battery analytics platform developer Modo Energy found battery storage revenues decreased by 26% in July.

A spokesperson for BW ESS told ESS News that the company takes a “portfolio view” and sees the tolling agreement as “long-term revenue visibility for a small portion of our portfolio – 100 MW out of 700 MW.”

“We remain enthusiastic about the opportunities in the GB market,” they said.

BW ESS and Penso Power’s deal with Shell is the second major BESS tolling agreement announced in the United Kingdom in 2024. It follows the landmark two-year tolling agreement announced by Gresham House Energy Storage Fund and a subsidiary of Octopus Energy, in June. That agreement covers around half of Gresham House’s BESS portfolio, which is targeted as 1,072 MW for the second half of 2024.

Wendel Hortop, Markets Lead at Modo Energy, told ESS News that although no details on price have been disclosed for the Bramley agreement, the deal would represent a balance between “achieving a desired return on the project versus locking in early project revenues.”

Hortop added that opting for a longer-duration agreement could be worthwhile given the uncertainty over whether the market will improve for battery revenues in Great Britain. Alternatively, the toll could allow BW ESS and Penso Power to raise debt against future projects, freeing up capital to use on the development of their 400 MW/1 GWh Hams Hall and 200 MW/500 MWh Berkswell BESS projects, scheduled to go live in 2026.

And while it is hard to say if two agreements in 2024 mark the start of a BESS tolling trend, Hortop said the deal “could increase pressure on others in the utility space to follow.”

“For those who have agreed tolls to date (Octopus and Shell) we think it’s unlikely they’ll sign anymore until they see how the current deals – and the market – develop,” he said.

The Bramley tolling agreement also extends Penso Power’s relationship with Shell Energy Europe in the United Kingdom. The two businesses entered into a multi-year offtake agreement in 2020 covering Penso Power’s 100 MW/100 MWh Minety battery storage project, which came online in 2021 as the largest battery trading in Great Britain’s Dynamic Containment market at the time.  

New ground

Richard Thwaites, CEO at Penso Power, said the contracts it agreed with Shell in 2020 served as a “template for the industry” and the new tolling agreement “breaks new ground.”

“It represents a coming of age for the battery energy storage sector,” he said.

Rupen Tanna, head of power and systematic trading at Shell Energy Europe, said that while tolling agreements have been a feature of “conventional energy trading” for many years, extending the model to battery storage will support the United Kingdom’s energy transition.

“The experience gained through these early tolling contracts will be invaluable to the wider market,” said Tanna.

Penso Power and BW ESS have developed the Bramley BESS project as part of a joint venture agreement signed in October 2021. The agreement sees BW ESS commit capital to fund the build-out of Penso Power’s UK project pipeline.

Bramley is also the first BESS project in Europe to deploy Sungrow’s PowerTitan 2.0 liquid cool BESS. The system combines a 2.5 MW Power Conversion System using integrated string inverters and a 5 MWh battery into a single container. This has allowed BW ESS and Penso Power to deliver a 330 MWh project with a relatively small project footprint, according to the project developer.