In 2019 Pivot Power had secured a 2 gigawatt portfolio of transmission-connected battery sites across the UK and were looking for an investor to enable their development. 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 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.
Our detailed trading simulation demonstrated what revenue could be anticipated in a typical year. This analysis showed that a double digit unlevered IRR would be possible and therefore that the projects were investable. We 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 Renewables acquiring the entire portfolio in November of 2019. Habitat Energy now optimize the UK’s first transmission-connected battery, developed by Pivot Power in Cowley, Oxford.
Habitat Energy’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 ancillary services 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, our simulations provide 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.