The declining cost of batteries allows energy storage investors to pursue a higher share of contracted revenues without sacrificing on returns, the CEO of Fidra Energy told S&P Global Commodity Insights, two days after the company won consent for the UK's largest battery energy storage system.
Fidra's 1.4-GW/3.1-GWh Thorpe Marsh project in Yorkshire, northern England, was approved Jan. 28 by Doncaster Council, the largest in a recent spate of giant UK batteries to win approval or take investment decisions.
The developer is now running full tilt toward financial close of the £600 million project by April, with the facility set to be funded by a combination of bank debt and equity from Fidra's owner, EIG Global Energy Partners, Fidra CEO Chris Elder said in a Jan. 30 interview.
Recent investment activity in the market has been driven by battery cost reductions, according to Elder, who cited as causes heightened competition in the Chinese supply chain and the falling cost of lithium. Battery costs, which may account for 60%–70% of a project's capital expenditure, have halved in the last year, the executive said.
Large-scale projects also benefit from economies of scale: Thorpe Marsh is 20%–30% less expensive on a pound-per-kilowatt basis than a comparable facility of 50 MW to 100 MW in size, Elder said.
"That allows us to structure the deal in a way that we can actually contract more of our capacity while still achieving the returns that EIG as an infrastructure investor are looking for," the CEO added.
Fidra is aiming to contract at least 50% of Thorpe Marsh's revenues over the long term through a combination of capacity market revenues, fixed-price tolling arrangements and optimization agreements with floor prices. The remaining 50% of revenues will be merchant.
"These large batteries are really designed to operate in the wholesale market," Elder said. "They do have some ability to achieve ancillary revenues, but the bulk of the business case is an energy arbitrage case."
Thorpe Marsh will be built in five 280-MW phases, with the first coming online in late 2026 and the last in late 2027 or early 2028. Each of the five arrays is individually metered and capable of being contracted with different offtakers, Elder said.
"Part of the strategy for Thorpe Marsh is to create a balanced risk profile, which is attractive to our investors and attractive to project finance banks as well," the CEO said.
Capital not unlimited
Market observers are predicting big growth for Europe's battery storage sector in the coming years as the amount of volatile wind and solar capacity on the grid increases.
Analysts at S&P Global Commodity Insights forecast 6 GW of large-scale, front-of-meter lithium-ion battery capacity will become operational in 2025 across Europe, with another 10 GW in 2026. In 2024, some 4 GW was added, bringing the total to date to 11 GW.
In the UK, Europe's largest battery storage market, the government is targeting 23 GW to 27 GW of capacity by 2030, up from 4.5 GW today.
Large-scale projects like Thorpe Marsh "are an interesting asset class for people to invest in, whereas if you go back 12 months, the capital costs were very high, [and] market prices were not as good as they are now," Elder said.
Still, the executive warned that there is "not an unlimited amount of capital" and predicted "a race" to get the big projects built in the next three or four years.
Elder added that the vast pipeline of projects is not necessarily indicative of what actually will see the light of day.
"When people talk about 700 GW in the battery queue, in reality, there's probably only 10% of those which are truly viable as projects. We think ours are in there," Elder said. "There are a lot of people who are going to invest, but they're not an unlimited number."
Fidra's pipeline
Fidra was launched in October 2024, created by EIG out of West Burton Energy, which sold its operational assets — a 1.3-GW gas-fired power plant and a 49-MW battery facility — to TotalEnergies SE in mid-2024.
"We renamed the remaining platform ... as Fidra Energy with a strategic ambition to become a large independent battery developer, operator [and] owner in the UK primarily, but also looking at Italy and Germany as target markets as well," Elder said.
Thorpe Marsh, located at the site of a former coal plant, was acquired by the former West Burton Energy from The Banks Group Ltd. in October 2023.
Its former owners had submitted a planning application but had not yet received approval. After the acquisition, Fidra in March 2024 resubmitted an optimized application and went on to receive consent 10 months later.
Beyond Thorpe Marsh, the developer is also progressing with its 500-MW West Burton C battery storage plant, which it expects online in late 2027, and the earlier-stage 1.2-GW Bicker Fen project.
