BY BEN COOK
- Major storage investors Gore Street and Foresight are utilising Arenko’s trade optimisation software
- Former storage asset owner Arenko has re-positioned itself as software provider
- Key to its success is providing investors with clarity on future returns, says Arenko CEO Rupert Newland
How can you optimise the performance of energy storage assets?
Energy storage optimisation software provider Arenko believes it has the answer.
Arenko is a company that has evolved significantly since it was established – by CEO Rupert Newland – in 2014 primarily as an owner and operator of battery assets.
It’s flagship asset was the 41MW Bloxwich battery located in Birmingham in the UK, which was launched in 2019 and was, Arenko claimed, the “largest single-room battery in the world”.
A key purpose of the battery, the first to be autonomously traded in the National Grid’s balancing mechanism – which is used to balance UK electricity supply and demand – was to demonstrate Arenko’s ‘trade optimisation and automated dispatch software’.
In Arenko’s view, it turned out to be a successful demonstration. At the end of its first year of operation, Arenko claimed that the battery had “outperformed its closest peer by 65%” in the balancing mechanism.
Arenko attributed the success of the battery to its cloud-based software, which, it says, forecasts market conditions, performs millions of simulations per day to optimise trading decisions across markets, and then securely dispatches stored energy from the assets.
Buoyed by the success of its software, Arenko decided to go all in. As a result, it sold the Bloxwich battery to Gresham House Energy Storage Fund for a cash consideration of £20.1 million – plus further potential earnout payments – in July this year. The sale of the battery meant that Arenko’s balance sheet would be sufficiently strengthened to enable the company to fund expansion of its software and services platform and become a fully digital business.
High demand for software
Arenko’s proposition is clearly a convincing one – a number of major energy storage investment funds have recently agreed deals to use the company’s software.
Back in February, it was announced that Gore Street Energy Storage Fund – which has a market capitalisation of £400 million – had selected Arenko’s platform as a route-to-market for “an operational 10MW energy storage project”.
Meanwhile, in August this year, infrastructure investment manager Foresight Group – which has assets under management totalling £8.1 billion – signed a deal to use Arenko’s software to optimise the UK-based 50MW Sandridge energy storage project, which is owned by funds managed by Foresight.
In addition, Vattenfall this year signed a contract with Arenko with a view to improving output at its 22MW/16MWh battery co-located at the 228MW Pen y Cymoedd wind farm in South Wales – the first battery storage in the UK to be co-located at a wind farm site.
So is the energy storage industry failing to unlock the full value of batteries? And what are the benefits of stabilising returns on storage assets?
Energy Storage Report spoke to Arenko CEO Rupert Newland to find out.
How would you sum up Arenko’s offering and how has it evolved?
Rupert Newland: It’s a software package that can be put onto any asset and it automates the asset across different markets in which it operates.
We previously owned assets and that was extremely important for us. When I set the business up it was as an owner and operator of battery assets.
But when we sold our first assets in 2016, it became very clear that if you really wanted to capture value in this market, you needed to have proprietary software. What the aggregators offer is a side part of that, what some of the tech providers offer is a side part of that, but really, in order to automate, you need to have a full end-to-end solution combining the technical capabilities of the asset with the markets in which they operate. And we provide that end-to-end solution. So we started building the software business as a way of gaining our own competitive advantage as asset owners. It then became very clear that our software is the most valuable part of the business.
On the back of that I sold the assets 15 months ago. We’re now very much in a commercialization phase. We sell two sides to it, we sell a trading service where our trading desk operates our software on behalf of our customers. And the other side of it is we set up a fully licensed software product. And that’s really where we see the growth coming in in this industry, because it enables two things, an optimised return and a substantial reduction in the cost of operating these assets.
What exactly does Arenko’s software do?
RN: We’re controlling the assets, we’re bidding the assets and we’re understanding what the profitable pathway through is. We also offer asset management services – in effect we’re using data to work out what is the right way to operate your asset, providing that full suite, from control of the asset right through to bidding and dispatch.
In what way is the storage industry failing to unlock the full value of batteries?
RN: The storage industry has come an incredibly long way in the last five years and, specifically, it’s also come a long way in the last 12 to 18 months. When Covid happened, we spoke to the the National Grid and said ‘let’s showcase the potential of batteries as a way of managing the system at this really critical time’. We ran a series of extended trials with National Grid last year, we built a software module in less than a week in order to be able to basically create a profile that was better than combined cycle gas turbines (CCGTs). The results came out, the batteries were cheaper, batteries were more effective and they offer a pathway to a zero public grid.
The answer is really innovating in this industry and trying to push things forward, particularly from a software perspective, because ultimately batteries are software-defined assets. Batteries are useless without a controls capability that sits on top of it to know when to do and how to do the things that it wants to do. And so the better quality of software, the better quality of operations.
What are the benefits of enhancing returns on battery assets?
RN: We’re all about trying to stabilise the return for investors. It’s not necessarily a case of improving the return. It’s about stabilising the outlook that I think is so key for investors. You can point to the return you’re getting today on batteries, but it’s very difficult to justify that the return will still be there in ten-years’ time. Investors in battery assets are investing over a long period of time, so it’s trying to provide as much clarity over future outlook that is probably more important than trying to say you will generate a higher return today.