Renewable Energy M&A: Offshore Wind + Battery: Analyze Orsted's Strategy to Maximise Returns from its £37.35/MWh Hornsea 3 Project

published on 13 June 2024

🔋 Ørsted has made a final investment decision on a 300 MW/600 MWh battery energy storage system (BESS) to be co-located with the Hornsea 3 offshore wind farm's onshore converter station in Swardeston, near Norwich, Norfolk.

🤝 Partnership with Tesla

The project will be developed in collaboration with Tesla, which will supply the megapacks for the BESS.

⚡ Primary Function: Energy Arbitrage

The BESS will focus on energy arbitrage, storing excess power during peak generation times and discharging it during low supply periods to help balance the grid.

🔍 CfD + BESS - The New Way Forward?

– Stable Revenue: Hornsea 3 is contracted under the UK’s Contracts for Difference (CfD) program at a strike price of £37.35/MWh. However, generators lose top-up payments from the government if the market experiences over 6 hours of negative pricing. Future CfD auctions may reduce this threshold to even just one hour.

– Market Challenges: The UK saw a record-breaking 214 hours of negative power prices in 2023, averaging over half an hour daily. This rise in negative pricing and curtailment poses a challenge for generators.

– Revenue Stability: Introducing BESS will mitigate market fluctuations and cost imbalances for intermittent sources, ensuring more stable revenue from CfD contracts.

The above analysis is proprietary to Enerdatics’ energy analytics team, based on the current understanding of the available data. The information is subject to change and should not be taken to constitute professional advice or a recommendation.

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