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TLT LLPTLT LLP
Legal considerations – from spreadsheet to deploymentlegal implications
Maria ConnollyHead of Real Estate and Energy & Renewables, TLT
TLT LLPTLT LLP
Energy storage: overview of current activity
EFR (4 years) / FFR
Capacity Market auction (up to 15 years)
Standalone
Co-location alongside existing
installations
Co-location alongside proposed
installations
Behind the meter
Capacity market auction -December 2016
1.5 GW pre-qualified batterystorage projects
501 MW battery storage projectsawarded contracts
TLT LLPTLT LLP
National Grid: EFR / Capacity Market
200 MW of EFR contracts awarded across eight projects
Provisional Capacity Market auction results – approx 500 MW of battery
storage projects have been awarded 15 year contracts
Over 1.4 GW of Demand Side Response projects received one year
contracts
Clear indication of the crucial role battery storage will play in the future of
the national grid
TLT LLPTLT LLP
Project Structures
Option Agreement
Form of lease (or transfer if acquiring freehold)
Title due diligence
Negotiation of key documents with suppliers
Corporate structuring
Tax structuring
Fundraising - debt v equity
TLT LLPTLT LLP
Standalone
Number of sites received planning with plenty more in pipeline
Greenfield and brownfield sites as well as conversion of solar option
agreements for storage
Life after 1.2 ROC solar projects that aren’t built out
New grid connections
Capacity Market
TLT LLPTLT LLP
Co-location
Existing project structure:
Ownership
Funding constraints
Do sufficient rights exist for storage?
Shared grid connections and other infrastructure
Mitigating risks arising from a temporary loss (de-energisation) of the
shared connection
Termination of arrangement
TLT LLPTLT LLP
Behind the meter
Benefits: arbitrage, connection costs, Triad avoidance, uninterruptable
power supply.
Revenue streams: ancillary services to the National Grid
The challenges:
Storage doesn’t fit within current UK legislative & regulatory framework
Potential for double charging of system uses charges
Is planning permission required?
Lack of current health & safety standards
Issues where BTM storage is connected to a constrained network
If BTM is co-located, this can impact on renewable incentives
Short term nature of ancillary services contracts
TLT LLPTLT LLP
Co-ordinating revenue schemes
Complex rules for each revenue stream – how will they interact with each
other?
Capacity Market agreements can be held with FFR contracts
Conflicts require prioritisation of FFR over the Capacity Market obligation
EFR and FFR contracts cannot be held simultaneously if there is any overlap
between the contracted delivery times
Overlapping deliverables need to be reviewed carefully to identify potential
conflicts
The CM Rules “may” be amended to allow for the provision of EFR ahead of
the next Capacity Market prequalifying round
Ofgem will notify the market of it’s decision Spring 2017
TLT LLPTLT LLP
Co-ordinating revenue schemes cont…
Procurement timing
Contracts are procured at different times and for different periods of time,
making it difficult to line-up different revenue streams.
Wider system co-ordination risks
Will services procured by National Grid be consistent with services procured
by DNOs?
TLT LLPTLT LLP
Structuring projects
Legal structure can provide revenue certainty
Contracted payments can provide core revenue certainty
Risk of construction and delivery penalties can be backed-off against EPC and
O&M contracts
BUT
Wider risk of uncertainty
New revenue schemes relatively immature
New revenue schemes are still reacting to market changes
Future changes could impact on eligibility and / or competitiveness
TLT LLP
Conclusion
Secure land rights (and prior exclusivity)
Careful legal structuring around co-location projects
National Grid tender requirements
Capacity Market auction
Increased activity in Scotland, NI and ROI
Future proof project documents for funding (and sale)
Maria ConnollyHead of Real Estate and Energy & Renewables, [email protected] Dial: 0333 00 60109Mobile: 07909 967322
