When Pivot Power was looking for a buyer for their UK battery storage portfolio, Habitat Energy were brought in to use their optimisation platform and expertise to accurately simulate the trading activity and revenue potential of the projects to underpin the investment case.
In 2019 Pivot Power had developed a 2 gigawatt portfolio of transmission-connected battery sites across the UK and were looking for an investor to acquire them. They needed a robust financial investment case model that would show a potential investor what IRR could be achieved given the capex, opex and revenue of each site.
Habitat Energy were engaged to undertake detailed trading simulation that would prove what revenue could be anticipated in a typical year. Their analysis showed that a double digit unlevered IRR would be possible and therefore that the projects were investable. The Habitat Energy team worked closely with Pivot Power and the Morgan Stanley advisory team to explain how battery trading worked and how confidence could be built in the revenue case. The process was successful, with EDF acquiring the entire portfolio in November of 2019. Habitat Energy began optimising the first of the Pivot Power batteries to be constructed in June 2021 in Cowley, Oxford.
Habitat’s approach in building an investment case is to focus the central scenario on the revenue that can be anticipated from a purely merchant trading model – that is, one where the battery buys and sells power in the day ahead, intraday, and balancing markets only. Other revenue streams such as Firm Frequency Response and Dynamic Containment would of course be targeted when the battery is built (indeed Habitat Energy is, at the time of writing, the largest participant in the Dynamic Containment market) and can provide attractive upside in the short term, but are prone to saturation in the long term, so best not included at the central case scenario.
As well as providing annual trading revenue estimates backed by half hourly resolution, Habitat Energy’s simulations provided granular insight into trading activity, cycle rates and temperature to support design decisions such as battery duration, HVAC and warranty. Because our simulations are done on the exact same platform we use to trade real assets, our clients know they can rely on us to deliver the real revenue in line with their expectations when the projects are built.