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Good news for Gore Street

Gore Street Energy Storage says that the energisation process of its 79.9MW Stony asset in Milton Keynes has been scheduled with National Grid ESO to begin on 31 July 2023. The process is expected to take up to two weeks to complete. Once operational, the asset will bring the company’s total operational portfolio to 371.5MW.

Based on data provided by Modo Energy, the company’s assets in Great Britain generated an average revenue of £7.62/MWh for the six-month period from January – June 2023. This compares favourably to the GB average for a one-hour system, which was reported to be £6.83/MWh during the same period. Two-hour systems were reported to have generated, on average, just 7.6% more per MW than the company’s average during this period. Gore Street says that, given the material extra cost required to build the additional duration, this supports its view of optimal duration in this market [other storage funds have been trumpeting the benefits of longer duration assets].

Gore Street feels that the GB market faces increased saturation and declining prices. It says that portfolios dedicated solely to this market are experiencing decreasing revenues. Its strategy has been to invest more abroad.

Its 130MW (72.6MWh) Irish portfolio generates the majority of its revenues from the DS3 (Delivering a Secure Sustainable Electricity System) programme, which is Ireland’s ancillary services market. This programme was established to integrate non-synchronous [with demand] generation, led by wind power, and rewards assets for their availability during periods of heightened grid volatility.

From 01 January – 31 March 2023, the company’s operational Northern Irish assets, Drumkee and Mullavilly, played a significant role in driving revenue for the portfolio. They achieved an average revenue of £24.60/MWh across the quarter. This high level of revenue was due to the need to stabilise the grid as a lot of wind power was generated.

While Irish revenues declined as weather conditions stabilised and moved out of the winter months, extreme weather conditions in Texas resulted in a surge in revenues from Gore Street’s operational portfolio in the ERCOT [Texan grid] market from 01 April – 30 June 2023. Heatwaves experienced in the state caused power prices to spike; as a result, the company’s assets generated an estimated hourly average of $175/MWh between 18 – 21 June 2023. In managing this volatility, the demand for energy storage enabled the Texas portfolio to deliver estimated average revenues of $14.76/MWh for these three months.

In addition, the company says it has formed two new engagements with Tenaska [an Oklahoma-based power plant developer] and Enspired [an Austrian power trading company]. These companies provide route-to-market services for the company’s assets in the US and Germany, respectively. Gore Street says that, since establishing these relationships, it has achieved cost savings and gained access to additional revenue streams.

Investment Tax Credit benefit increased for US assets

The Investment Tax Credit (ITC) forms part of the $369bn energy security and climate change initiatives available under the recently introduced US Inflation Reduction Act (IRA). This enables asset owners to deduct a percentage of the total cost of qualifying renewable energy projects from their federal taxes, including energy storage technologies.

Under the IRA, a basic tax credit of 30% is available, and additional ITCs can be obtained based on specific requirements. Per the 2022 unemployment data published by the Bureau of Labour and Statistics (BLS), the sites: Dogfish, Wichita Falls, and Mineral Wells (combined 95MW) all qualify for 40% ITC, provided that unemployment rates in these regions remain equal to or higher than the national average. This additional 10% ITC adder has yet to be factored into the assets’ underwriting and represents a significant potential upside for shareholders.

GSF : Good news for Gore Street

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