In October last year Abu Dhabi renewables giant Masdar bought UK energy storage developer Arlington Energy for an undisclosed sum.
Since then the firm – Masdar Arlington Energy – has been putting the “£1 billion to work”, as part of the UAE group’s pledge to invest in British battery storage.
That includes building out a 3 gigawatt hour (GWh) pipeline of “high quality assets that will drive the energy transition”.
In this question and answer, Matthew Clare, chief executive of Masdar Arlington Energy, sheds light on the firm’s plans to develop battery storage solutions in the UK, as well as some of the challenges facing the renewables sector.
© Supplied by Masdar Arlington EneGiven Arlington opted to partner up with Masdar, does that mean UK investors are less receptive to battery storage?
- It’s not necessarily the case that UK investors are less receptive. Masdar Arlington was early to the energy storage investment picture, focussed on merchant markets and long-life assets – a philosophy similar to Masdar.
- Delivering capital and expertise to clean energy projects at the right moment is critical for the economic viability of scaling up renewables capacity and accelerating the energy transition.
- Sometimes it requires the investor community to step into an asset class that is commercially less well understood – but now there is some really educated capital starting to understand it.
- Optimisation and stacking value are essential components in bringing investor confidence around, but we’re seeing increasingly sophisticated management systems that will facilitate multi-use approaches and optimise duration.
- Our agreement to use Octopus’ technology platform Kraken, for example, will enable smarter energy storage systems that deliver lower costs and improved efficiency. As BESS evolves, data and analytics are bound to improve how battery storage is distributed and the investment community is learning this.
How will Arlington help Masdar in its wider ambition to boost its UK footprint? What is it about the UK that has made it a priority for Masdar?
- This deal and Masdar’s investment here reflect a strengthening and longstanding relationship between the UK and the UAE that is built on a joint effort to decarbonise through clean energy projects.
- The strategic alignment between the two markets is already helping to shape Masdar’s portfolio and the SIP will continue to be an essential foundation which supports collaboration and matches the asset partnerships and acquisitions which are critical for scaling up at speed.
- Specifically on battery storage, the UK and UAE share the belief that greater investment in energy storage is critical if countries are to expand their renewable energy portfolios and achieve net-zero ambitions.
- Existing portfolio and expertise at Arlington will enable further investment from Masdar, which is already one of the largest in renewables globally – especially in offshore wind, where Masdar and the UK has an advantage.
- In this area specifically, Masdar is currently building a strong team of 13 people in the UK hub with key senior people (former RWE, Orsted, Shell) focused on offshore wind.
- Driven by this commitment to expand its presence, several transactions are at an advanced stage totalling 5GW of gross capacity and the plan is for these partners to jointly participate in offshore wind auctions.
What is the scale of Masdar Arlington Energy’s project pipeline? And what are the barriers to delivering that?
- Rich plans over the next 5-7 years, with aim to increase deployment of 3,000-5,000MW just in battery storage.
- It is no secret that the ability to connect to network given infrastructure constraints at national grid and distribution level is a challenge. Though I must acknowledge that National Grid and Ofgem are working incredibly hard to facilitate assets coming online – and the publication of its five-point plan to tackle the backlog is a welcome start – this remains a reform that will be transformative should it be implemented.
- Knowledge sharing across key bodies and grid stakeholders is crucial if we are to guarantee genuine capital within this space is capable of being deployed in in a timeframe that ensures net zero goals are reached and energy security is protected.
- There is also a short supply of talent in the BESS sector and access to the engineering expertise that is now prevalent in wind and solar is critical for BESS. Masdar Arlington is encouraging change, however, and Masdar has a plan to increase recruitment per quarter until 2025 to support the development of the 3GWh pipeline.
How have inflation and supply chain crunches impacted the rollout of energy storage?
- There is no denying that raw materials cost increases present concerns about financial viability, but the economics in this sector remain solid.
- We are still learning about what the technology constraints are and when the technology is evolving, transformer delays and battery delays that are beholden to forces across global markets make it tough for this asset class in particular. If projects are brought online too early because of disruptions, there is risk of degrading and that is something that we are having to work hard to navigate.
- That said, capex cost increases can be misleading when there are multiple factors that contribute to that figure and effective management of supply chains are complicated.
- Utilising tier 2 suppliers in a way that the solar panel industry showed to be effective is an option – and you’re now seeing these arrive in force across the BESS industry. Operators are becoming more comfortable with this and the investment community is becoming more familiar with the sectors as a whole.
- Financing plays a huge role in managing supply chain risk and in time we will get there.
Is mass energy storage the best way of countering the intermittency of renewables? Could CCS or nuclear be a better option?
- It is a highly effective means of combatting intermittency and decarbonising all the while. The technology itself is extremely flexible and duration is the key for secure energy supply.
- BESS is the less carbon intensive route but I’m pragmatic about balancing energy security and the renewables mix. We are, however, already investing in and deploying significant levels of renewable power in the UK and battery storage will only create the capability to install more capacity.
- The UK renewable energy supply has to confront a use it or lose situation, but BESS is proven to alleviate that as a balancing mechanism that will also allow cleaner energy into the mix.
- I’m aware of the exploration into nuclear by the UK government, which represents another alternative to carbon intensive fuels, but the UK’s coastline holds an advantage that we needn’t forsake.
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