04 Nov 2019
At a glance you might think they’re a flock of storage units. Rows of dark grey shipping containers in a muddy field where a few pigs used to root around. In fact these hulking metal boxes, a few miles outside Taunton, represent a breakthrough for green energy - and valuable income potential for their owners South Somerset District Council (SSDC).
A stick commonly used to beat renewables is that we can’t tell the sun and wind when to be at their most productive. It can be windy at night when most of us are asleep and sunny during the day but not at tea-time when the nation’s ovens and TVs are on. All those wind turbines and solar panels doing their thing with nowhere to go. So, we need capacity to store the energy or it’s wasted - and one way of doing that is in batteries.
Which is why, on the Taunton site, each metal container houses a series of lithium-ion batteries. By the end of 2019 it is expected to connect to a nearby substation, to ensure batteries will take surplus power from electricity and gas utility company the National Grid, store it, and release it when there’s demand.
One of the largest of its kind in the country, Taunton’s 25 megawatt battery farm has the capacity to power around 30,000 homes for an hour. That’s breakfast time covered for nearly half the households in South Somerset.
This is about balancing supply - and it’s something we’ll need a lot more of as our reliance on renewables increases.
The environmental benefit is one reason people at Lib Dem-run South Somerset District Council (SSDC) are excited about the Taunton project. “With the climate change emergency being declared by the council earlier this year, the political driver is there to make sure we’re seeking out these opportunities as well as other measures to improve the green agenda in South Somerset,” says Councillor Sarah Dyke, the council’s portfolio holder for Environment.
But there’s an enticing bottom line too. SSDC will buy surplus electricity from the National Grid, store it and sell it back at a higher price. Once the council’s initial investment of £9.8 million has been recouped - in six-eight years - that profit will be available to SSDC to invest in core services.
Austerity has not spared South Somerset. The council has lost more than two-thirds of government grant funding since 2010 and further cuts are likely. Between 2018 and 2022, SSDC needs to deliver savings rising to £6 million a year even while demand for (and the costs of) services to its ageing population rise.
In this context, the council’s commercial team is charged with bringing in £2 million a year. The battery facility represents about 10-15% of its investment portfolio.
“I would say this is probably our highest-risk investment across the portfolio,” says Commercial Director Clare Pestell. “But it’s also got the best possible outcome of all our investments if everything goes as we forecast - because of the environmental benefits as well as the income.”
Speed of delivery
Perhaps another reason for the sense of excitement at the council is the blistering pace at which the scheme has been rolled out. “It’s been quite fast-flowing for a project of this size,” says Pestell. “We’re all very committed to it and we talk all the time about the latest thing that’s come up - can we move this, can we get that signed off? The logistics of it have been phenomenal.”
“Quite fast-flowing” seems an understatement. It was only in 2017 that the council wrote its commercial strategy and invited local businesses to come forward with ideas. In January 2018 a company called Opium Power Limited proposed the battery facility project. Pestell liked the look of it and ran it by independent experts. By May 2018 the council had formed a partnership with Opium, purchased the pig field, and set up a trading company. “Then a very fast rollout programme commenced,” says Pestell.
“Because the batteries are built to order and the shipping containers are racked out, air-conditioned and built off site, we were able to commission that from BYD, an international battery supplier, at the same time as we were clearing the site, fencing and getting the infrastructure done. Most of the equipment was onsite by December 2018. We had an open day in March 2019 once everything was more or less finished.”
After that it was a case of testing and waiting for legal agreements to get the batteries connected to the National Grid.
If the last pieces fall into place in autumn 2019 as expected, less than two years will have passed between the first approach and what Pestell calls “energisation”.
One of the foundations for this high-risk/high-return project was a commercial strategy that envisaged a balanced portfolio of investments.
“While we’d like to do lots of renewable energy, from a financial investment point of view it’s not sensible to put all your eggs in one basket,” says Pestell. “We do have to justify how we’re spending government and taxpayers’ money and show that we're taking sensible decisions.
Historically councils have “a certain image” says Pestell. “Larger commercial operations often don’t want to work with them.”
So as soon as the commercial strategy was signed off, SSDC’s press team made sure businesses knew about it.
“We wanted to show business locally that we’re a council they can do business with and we invited them to bring us proposals. We had quite a lot of interest. It was a good way of getting businesses to approach us rather than having to go out and find business partners - if they came to us there was a willingness to work with the council in the first place.”
Dealing with resistance
Pestell says any pushback she has encountered has been in the form of questions such as ‘How do you know it’s going to work? How can you prove what it’s going to earn? How do you know it’s a good investment of public money?’
“Most people were very keen on the idea of renewable energy - why wouldn’t they be? But it’s a new market and so there was a lack of confidence. The questions I’ve had are about reliability of income flows for the future.
“There’s very little evidence at the moment from the few facilities that have been built because some of them have barely been up and running long enough to produce any trends.
“Unlike a council investing in a solar park, where the market is established and you can pretty much forecast reliably what income that will bring you, we’re moving into brand new technology in a changing marketplace, with unpredictability, changing competition - and the contract situation is changing.
“So, the one thing I haven’t been able to tell councils who’ve contacted me is how guaranteed that income is because there aren’t any guarantees at the moment.
“All we can do is mitigate the risks, and get the best specialist information and draw our forecasts from that. I think the one thing that everybody knows is that we’re not going to need less electricity going forward, but more - and we know the trend is towards more renewables.
“As an investment surveyor, you take all the professional advice you can, you look at all the possible issues that could go wrong, you mitigate those risks and then you take a balanced decision. And the return you get from taking that risk has to warrant taking the risk.
“The flip side is you have to ask the question: what is the cost if you don’t do this? What do we do with that money and what’s the cost to the environment if facilities like this aren’t built in the UK and help the industry move forward? Will we all look back in 20 years time and wish we’d invested and helped our environment more, when it’s too late to do anything about it?
“It’s an element of our investment portfolio - but one of these investments has to be the riskiest and one has to be the least risky. I think it’s an exciting and innovative project to be taking forward on behalf of the council.”
Building confidence has been helped by playing to the strengths of expert partners.
While SSDC has acted as the bank, says Pestell, she highlights the role of Opium Power: “If they hadn’t brought the project and put the package together for us, we wouldn’t have known about it.”
Just as important is the specialist knowledge of Kiwi Power Ltd, a broker in the complex and fast-changing power market. “A couple of years ago you were able to buy seasonal or year-long contracts to supply energy back to the grid. Now, because the technology is improving, it’s more management-intensive - you can buy 30-minute slots, daily slots, weekly slots or seasonal slots.”
“Kiwi Power have been fantastic,” says Pestell. “Without their knowledge of how these auctions work, those cash flow forecasts would have been very difficult for me to work out.”
“And there are other partners. British Solar Renewables are the key technical contractor onsite connecting everything together. BYD supplied the batteries. Then there’s a whole host of subcontractors doing land clearing, fencing, CCTV, security. There are lots of people involved.”
Even if the council is sympathetic to a scheme, and governance is in place, you still need the right project. SSDC’s commercial team receive many proposals each week and only a few make it through.
You’ll need to look at the cost and potential for each proposal on its own merits, says Pestell. For example, the availability of an appropriate site very close to a substation was critical in keeping costs of cabling down.
With so many stakeholders, speed of delivery has hinged on a small team with the funds and authority to make decisions.
“The council has decided that to be commercial you need a fairly small board of technical experts that can act swiftly,” says Pestell. “I think that's very important: if you want to be commercial you can’t wait 3 months for a full council meeting and try and get 60-70 people to vote on it. You’ll never get anything done at the rate the commercial markets need to move.”
“The council delegated authority to a board which includes myself as well as a Councillor, a legal expert, a financial expert, and a property expert. The five of us have authority within certain parameters to look at investments, and make certain levels of return. If it ticks all our boxes and everybody on the board votes in favour, we take that recommendation for approval to the Council Leader and Chief Executive. The final decision is theirs but we’ve done all the due diligence and legal and financial work, there's a technical expert report - we do all of that in advance.
“There’s no external involvement, no central government, no other council input. That’s how we do it here and it’s working very well - as evidenced by the investments delivered and the returns that are protecting council services to our communities,” says Pestell.
Expect the unexpected
“The only thing that’s caused us frustration,” says Pestell, “is that while we focused on everything we could control, what’s holding us up now is the final legal agreements to do the last bit of cabling into the National Grid and that is out of our control - we are relying on the legal department for the National Grid and the legal department for Western Power, a collective of four electricity distribution companies. It’s not something we can make them do any quicker.
“I think if we had started that earlier we might have been able to bring forward energisation by a couple of months.”
Surely there have been other moments of doubt?
“It does keep you awake at night when things go slightly astray. This is a complex project in a new market and so there is no manual on how to do this. For example, our batteries arrived in Southampton port and we’d arranged lorries and cranes to take them off site and then there was a fire and they shut the port. We had to rearrange all of that transport and craneage for another day.
“When the cranes did finally get on site a week later it was too windy because these shipping containers weigh the best part of 30 tonnes and we could not lift them into place,” she says.
“Things like that are totally out of your control. You’ve fine-tuned everything to have cranes arrive on this day, lorries arrive on that day, and then it’s all put out by a few days. It requires an enormous amount of nimble management. But I think that comes with the territory – with any development project you do get a few things from left field thrown at you.
“But I don’t think we ever had a moment where, once we’d committed to doing this, we felt we were not going to finish it.
Inspiring other councils
Pestell says she has already been contacted by numerous councils and companies interested in SSDC’s battery farm. “There are a lot of councils watching and waiting to see if the scheme works because I think it will give them the confidence to move forward too. We’ve had a lot of contact from other councils very keen to do this. I think it’s a real catalyst.”