The highly regarded and agenda packed Aurora Spring Forum 2022 took place last week in the City of Oxford. Following tradition, the agenda hosted genuine thought leaders from the energy and power world. Rt Hon Kwasi Kwarteng, Secretary of State opened the conference, followed by a speech from Ben van Beurden, CEO of Shell. Limejump’s CEO, Cat Newman, was invited to speak on a panel to give her insight on the investability of utility-scale batteries in the UK and the current challenges associated with their deployment. This blog gives a high-level insight on what key topics and themes were discussed throughout the day by the most influential individuals in the energy market.
The forum was opened by the UK’s Secretary of State for Business, Energy, Industrial Strategy Rt Hon Kwasi Kwarteng, who delivered an update on the Government’s stance on the energy crisis that is directly impacting the UK’s cost of living. Kwasi reiterated that the conflict in Ukraine continued to have a ripple effect across Europe. Although only 4% of the UK’s gas comes from Russia, we remain vulnerable to a globally connected gas market. Regarding the cost-of-living crisis, to which energy bills are a large contributor, Kwarteng highlighted steps the government is taking. He explained that he thought consumers should be paying less and benefiting from the cheaper generation costs of renewables which is not being reflected in consumer tariffs. He highlighted that 10GW (in addition to the existing 12GW) of renewable power is currently being constructed across the UK – the equivalent to the capacity of three Hinkley Point C nuclear power stations. But he insisted that the government needs to go further, referencing The Energy Security Bill which will provide more detail on their plans.
Up next during the opening hour was Ben van Beurden, CEO of Shell. van Beurden focussed on the need for both targets and action to meet net zero goals and focused on many of the actions Shell has already taken, including reducing scope 1 and 2 emissions by 18% since 2016 and a transformed portfolio. van Beurden also highlighted Shell’s aim to invest £20-25bn in the UK’s energy system over the next decade.
Ben van Beurden’s key message was that the UK’s net zero ambitions and milestones need key actions. Nations, industries and businesses need ambitious milestone targets set out as soon as possible and they need to focus on incentives that deliver the best results. Click here to read the speech in full.
The two opening keynotes were both powerful and insightful, they successfully set up the agenda for the rest of the day.
Limejump CEO, Cat Newman, was invited to be part of a panel which took a dive into “Investing in grid-scale batteries: which markets are ripe for investment and why?”. Cat was joined by Ben Guest of Gresham House, Paul McCusker of Fluence and both Marise Westbroek and Ryan Alexander of Aurora. Cat was able to give insights into the investability of utility-scale batteries in the UK, but also highlighted the challenges faced by developers and owners trying to get new projects off the ground.
Cat was quick to highlight that utility-scale batteries are ‘ripe for investment’; “June-22 has been a record month regarding revenues for UK Battery Storage, 50% higher than the next best month which was back in Feb-22. Dynamic Containment prices over June cleared at an average of £38.09/MW/Hr for DC low, it is very exciting to see.” However, Cat highlighted that the UK battery market is falling victim to a number of supply chain and enablement issues that are already hampering what had been a steady battery deployment programme in the UK. “A big blocker that keeps coming up is the lack of grid connection capacity. Developers are being told to wait up to 4 years for a grid connection. It is difficult to see how we will reach our net zero ambitions if people can’t connect clean technologies to the grid in a timely manner. The system operator needs to come up with a solution to this issue in order to unlock the pipeline of batteries and renewable developments waiting to be built. The money is there for investment now, we need to unblock this as soon as we can”.
Cat and the fellow panellists went on to highlight several additional challenges facing the UK’s battery market earlier in the deployment process. The cost of lithium is having a significant impact on the initial project development phase, as it has increased by 400% over the past year and is therefore pushing up the price of lithium–ion cells, making projects more expensive than 2 years ago. Another point raised was the difficulty in getting orders of already manufactured battery cells to the UK. Cat also referred the need for planning regulations to ‘loosen’ or adapt quicker to the nation’s urgency to build more renewables and clean technologies as we look to be more independent with regards to energy security.
The Aurora Spring Forum did not disappoint, the thought leaders of the Energy Industry were out in force creating insightful debate throughout the day. A topic that was discussed at length, and littered many conversations was that of ‘energy security’. It is currently a top priority across the UK and Europe, however, with global gas (LNG) markets and power interconnection across Europe, the global and interconnected nature of energy markets is not going away. Instead, we need to consider what we can do within the UK but also how we can or may need to support some of our European neighbours over what could be a challenging winter period.
Grid connections dismay
Another clear message from the Forum is that investors are getting more and more comfortable with the financial returns from renewables and energy storage assets – the business cases stack up and they are investible. But, connections to the UK grid are currently slowing down deployment at a time that the market needs confidence to invest and build. Throughout the day numerous talks highlighted the challenges of bringing new assets online. Speakers discussed that the DNOs, TSO and local planning agencies need to reduce red tape and push through impactful policies. The current situation is reducing deployment of renewables and batteries and harming the country’s net zero ambitions.
Reaching net zero
Finally, to end on a more positive note, it is evident that there has been significant progress to date towards the UK’s ambitious net zero by 2050 targets. An investment of over $53tn and 37TW is required globally over the next 20 years to get close to reaching net zero targets. Now isn’t the time for complacency and the UK must continue to double down its actions in order to reduce the likelihood of irreversible climate change. As part of the Shell Group, Limejump will continue to support Shell with their ambitions in power. Our renewables and battery portfolio will continue to grow, and as these grow, more energy consumers will be powered by renewable energy and there will be greater resilience within the UK and European power systems, making us fit for the cleaner energy future to come.