2023 has already proven to be a milestone year for Gore Street Capital’s (GSC) diversification strategy, enacted on behalf of Gore Street Energy Storage Fund (GSF), as performance across the international portfolio has translated into industry-leading revenues. With weak returns achievable by energy storage assets in Great Britain in recent months due to market saturation and a lack of diverse revenues, the portfolio’s international assets have limited exposure to the restrictions of revenue from a single market.

Representatives of GSC hosted a Capital Markets Day on 3 October for a group of over 20 analysts, investors and brokers to further elaborate on the successes of this strategy and showcase the expertise of the Investment Manager’s in-house technical team. They were welcomed to the site of what will be the fund’s newest and largest asset to date – the 80 MW Stony project – when it enters commercial operations later this year.

Diversification of revenues is not possible in Great Britain (GB) as, except for some emerging local flexibility markets and an unclear locational preference for some assets in the Balancing Mechanism, revenue streams are the same from the south of England to Northern Scotland. The Stony asset will, therefore, be split into two components to chase alternative revenue strategies and limit the dangers of price cannibalisation when it joins GSF’s GB portfolio.

This currently accounts for 40% of operational capacity, as the fund is positioned across five uncorrelated energy markets that also include the integrated Irish grid, Germany, Texas and California.

GSF is unique in being the only listed vehicle with four different system durations within its operational portfolio, ranging from 26 minutes in Northern Ireland up to two hours in Texas. The systems have been designed to minimise capital expenditure while suiting the specific revenue streams available in each market. These have their own specific characteristics based on variations in weather patterns, market conditions like renewables penetration and flexibility needs, and policies. These differences have allowed the fund to pursue a wide range of revenue streams, which vary between seasons across the portfolio, and lower its quarterly portfolio revenue variability from £10,600/MW to £5,500/MW, while maintaining a similar average revenue per MW.

Thanks to this international presence, GSC's operational assets-under-management deliver higher absolute revenue than possible through a strategy limited to GB. The six-month average revenue of the GSF fleet to the end of June 2023 was £12.03/MW/hr against £6.95/MW/hr in GB for a one-hour system and £8.75/MW/hr for a two-hour system, based on Modo Energy data covering the period.

What these figures illustrate is the opportunities available in markets beyond GB. The near 30 MW operational portfolio of two-hour assets managed by GSC in the ERCOT market in Texas delivered an estimated £149.43/MW/hr in August, based on provisional figures, totalling around £4.5m – the highest ever monthly revenue achieved for GSF.

This was accomplished largely through the ERCOT Contingency Reserve Service (ECRS), a daily procured ancillary service introduced in June 2023. The assets were able to start delivering from the end of July thanks to prequalification achieved by GSC’s commercial team, working alongside route-to-market partner Tenaska.

The 9.95 MW/19.9 MWh Snyder project, one of three operational systems under management in Texas by Gore Street Capital that delivered record revenues over August.

 

The GSC team – made up of a diverse range of almost 45 energy professionals based in GB, Ireland and the US – has played a material role in the success of GSF by coordinating investment, technical and legal activities around the world. By keeping the expertise of GSC’s legal, construction and asset management professionals in-house, the company can apply contractual and technical lessons learned from each project to the next. The commercial team, meanwhile, can align strategies employed by optimisers to the wider goals of the firm, ultimately delivering the most value to GSF and its shareholders while informing future decisions by the investment team.

The combination of in-house expertise held across each discipline needed to deliver a global portfolio of energy storage assets will continue to deliver sustainable returns from the international portfolio, based on historic performance, while accelerating the global decarbonisation needed to tackle the climate crisis.

For more details on GSF’s diversification strategy and the expertise of GSC’s in-house technical teams, the presentation* delivered at the Capital Markets Day is available here:

Capital Markets Presentation

*The information provided in this presentation was created to support spoken presentations at the Gore Street Energy Storage Fund’s Capital Markets Day event, held on 3 October 2023. The data contained within has not been fully verified and is subject to material change without notice. Please direct any questions to the Investment Manager, Gore Street Capital.