Ground-breaking South Somerset District Council energy project will be ready for launch in March

| District

Innovative work which will see South Somerset District Council at the cutting-edge of renewable energy technology is being delivered.

The Council, in partnership with Somerset-based Opium Power Limited, is creating a new 25MW Energy Storage facility near Taunton to provide essential power management assistance to the National Grid. It will be the largest council-owned battery storage system in the UK and comes as a result of £9.8M of South Somerset District Council investment.

Cllr Henry Hobhouse, the Council’s portfolio holder for property and income generation, said: “I am extraordinarily proud and excited to be able to deliver such an important project. We have a vital role to play in caring for our environment and to be able to combine this with our new commercial approach which will see us protect services and become more financially self-sufficient is a great achievement.”

The idea of battery energy storage is simple - batteries store excess energy production during periods of low usage periods and resupply it to the grid when needed at peak times. Solar and wind powered generation cannot be regulated, and batteries provide the means to store excess production for use when required.

The facility being created will provide 25MW of instantly available electrical power on demand to the National Grid.  This will be used to balance out fluctuating demands on the local Somerset power grid.  Peaks and troughs in demand cause under and over supply if not correctly managed - this can result in frequency fluctuations that can damage electrical infrastructure.

Since the Council purchased the site in May, a fast-moving programme of delivery began including preparing the site following negotiations with local and international suppliers. This includes our partners in this project - Opium Power Ltd working with National Grid, WPD (Western Power Distribution), Kiwi Power, BYD and BSR Connect amongst others.

During this time, the new containerised battery units have been built, tested and shipped from China by world-leading energy supplier BYD.  The first batch of battery storage containers arrived in Southampton docks on Sunday 2 December and were delivered to the site a week later. Final connections and operational testing will take place in February for a ‘go-live’ operational date in March 2019.

The project will not only assist the Council's income generation needs and contribute towards the objectives of our commercial strategy, it also meets its Council Plan commitment to promote the use of green technology. It will additionally aid development in the region in the future by removing some of the electricity supply constraints which can be a barrier to further investment.

The Council is additionally working with the award-winning Kiwi Power Ltd to gain advice on the energy auction markets and prepare it for further bids for energy contracts into the future.

Cllr Hobhouse added: “This investment project will bring regular revenue into the council to help continue to provide services to our communities as well as help the region to supply a consistent supply of green energy through the national grid for the future.”

South Somerset District Council is the investor and co-owner of the facility, Opium Power Limited will be the project manager and co-owner, BYD Europe BV will be the battery supplier and BSR Connect is the project roll out connection contractor. Western Power Distribution will be the local distribution network operator.

David Owen of Opium Power Limited said: “The launch of this state of the art Battery Energy Storage System at Taunton is perfectly timed. It will coincide with the National Grid preparing to launch a number of new services in the emerging markets created by the System Needs and Product Strategy Consultation.

“These services will require almost instant response times, and will therefore not be achievable by other generating sources such as diesel and gas power that currently compete with battery in the marketplace.”

Questions and answers

How significant will this operation be?

This facility is extremely significant as it represents one of the larger energy storage facilities in the country.  The site can produce 25MW of power for the grid for one hour's duration which is the equivalent to powering more than 30,000 homes. This is only phase one of the project. There may be a further phase to follow which could increase the capacity of the facility.

What will the return for the investment be?

This investment was carried out within the approved governance of our commercial strategy. The minimum return on investment after repaying the loan and interest is 7.5%. We anticipate an Internal Rate of Return of c14% on the same basis based upon current cashflow forecasts for the battery energy storage facility.

Where will this be built?

This site is a few miles outside Taunton and was selected as it is in a position only 75 metres from a major grid substation.  It already had an approved grid connection and being so close to a connection point is highly unusual.  This therefore represents a major reduction in setup and development costs. In addition, the site came with all the necessary consents and was ready to develop immediately.

Who's involved and who will operate the site?

Opium Power Limited will operate the site utilising the services of its technology partners BYD, MSF Technologies, Kiwi Power.

Is it environmentally friendly?

Absolutely, a significant proportion of electricity generated from solar and wind is wasted because during windy and sunny periods there can be a large oversupply and there is no ability to store this energy.  By storing excess energy in batteries, it can be resupplied to the grid when required.

Why did South Somerset District Council recently have to make a short-term loan to Opium Power to cover VAT costs?

This is a complex issue. In taking forward the energy storage project, SSDC Opium Power has commissioned and sought expert advice from experienced professionals and companies at every stage of the project. This includes utilising an expert International logistics company for the importation of the batteries and seeking the advice of HMRC.

VAT is not payable on the importation of the batteries. However, procedures applied by HMRC and receiving ports have varied, we now understand. Within a few days of the batteries arriving in late 2018, the Port of Southampton advised our logistics firm that they wished SSDC Opium Power to pay the VAT before release, and then claim this back from HMRC. In seeking advice on the import procedures at no point previously had SSDC Opium Power been informed that this would be the case.

It is important to emphasise that this is essentially a procedural matter concerning importation and VAT, which are both notoriously complicated and not all of which is codified. Businesses in the commercial world are required to navigate these procedures as a matter of course and it is seen as part of normal business.

The payment of VAT in advance and the requirement to reclaim this has imposed no additional cost or delay on the project. However, given public money is involved, it is important that the Council is transparent in the use of public funds for the short term loan facility.

Other expertise commissioned to roll out the energy storage project includes:

  • National Grid
  • Western Power Distribution
  • BYD (Battery supplier)
  • and BSR Connect (experienced energy contractor)
  • Kiwi Power

All of these companies have a strong track record in this field and are contributing to making the project a success.

What is South Somerset District Council’s commercial strategy?

The Council is currently operating in a complex financial climate, where between 2018 and 2022, it needs to deliver savings rising to £6 million per year. This is in addition to having to cut its costs substantially since 2010.

SSDC has sustained a 70 per cent reduction in its Government grant funding since 2010 and further reductions are likely in the future whilst demand for and costs of many services continues to rise. It became clear that SSDC needed to make the most out of its assets and look for new opportunities which could generate income to protect the wide range of services our communities receive and create opportunities to fund new projects.

It has seen the Commercial Services and Income Generation team given an ongoing annual income target of £2m for commercial investment income and great progress is being made. Some of the investment will be outside of the district.

This is about making prudent financial decisions which will create significant income to get the best results for South Somerset and, where possible, supporting the local economy.

Thank you. You response is appreciated.

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