Co-location , co-location , co-location
UK grid constraints and delays to new grid connections are forcing sponsors to look at maximising existing grid connections via BESS and renewables project co-location . Ro Lazarovitch , Partner , Nicholas Neuberger , Senior Counsel and Sam Phillips , Associate at Bracewell ( UK ) LLP , outline the corporate structures being employed in co-located projects and their pros and cons to bankability .
The UK continues to push forward to achieve its net-zero targets . However , due to the increase of renewable energy developers and National Grid network constraints , the electricity generation market is facing significant delays for new grid connections to come online . As a consequence of this and other factors ( including inflated electricity prices and the need to balance intermittent generation ), sponsors and operators are looking for ways to maximise the value of their existing connections and ensure new project development is future-proofed .
The co-location of a utility scale battery energy storage system ( BESS ) alongside a renewables project is one solution that is currently receiving much market interest . Below , we take a brief look at the current state of the co-location market and the corporate structuring solutions being adopted , as well as bankability considerations .
BESS Co-location
The UK BESS market is still at a relatively early stage , despite leading the charge in Europe . However , it has recently rapidly grown , and further significant growth is expected in the medium to long term as power produced from hydrocarbons constitutes a smaller proportion of final consumption . The National Grid ’ s Future Energy Scenarios Report released in July 2022 showed UK BESS capacity in 2021 was at approximately 1.6GW , but that this could increase to as much as 20 GW by 2030 and hit 35 GW by 2050 . This forecast reflects what we and others are seeing in the BESS market , as a wider pool of lenders and sponsors accelerate their interest and involvement . Paired with this growing interest in the BESS market is an interest in the methods to maximise the output of renewable assets .
BESS assets can be co-located with any form of generation ( solar , wind , gas etc .) but the most common project format we see under consideration , construction or in operation , involves a solar-BESS combination . These projects are driven by a multitude of efficiencies that can be realised by co-locating the assets , as land use is maximised , infrastructure costs shared , generation intermittency balanced and grid connection capacity utilised in full . In respect of the last of these points , it is worth noting that the