Drax has signed an agreement to purchase three battery energy storage system (BESS) projects from Apatura, a UK-based renewable energy and BESS developer.
The portfolio comprises three ready-to-build two-hour duration BESS sites, with two located in Scotland and one in Northern England, with a combined capacity of 260MW.
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According to the agreement, Drax will pay a fixed sum of £157.2m ($206.9m) in staged payments between 2025 to 2028, contingent upon Apatura meeting specific construction milestones and project deliveries.
The acquisition of the first two projects is expected to be completed in 2025, with the acquisition of the third project scheduled for completion in the first quarter of 2026.
Apatura will oversee the project development and assume most of the construction risks, such as costs and delays, as indicated in the fixed cash consideration and contractual protections.
Construction across all sites is anticipated to begin in 2026, with the first Scottish site expected to become operational in 2027, followed by the remaining sites.
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By GlobalDataDrax considers two-hour BESSs as a promising opportunity for entering the short-duration storage market.
This move complements its existing FlexGen assets and broadens the scope of system support services while providing access to wholesale and balancing markets.
Drax Group CEO Will Gardiner said: “This acquisition is our first investment in short-duration storage as part of our FlexGen portfolio, supporting UK energy security and a clean power system.
“We are looking forward to working with Apatura on the development of battery storage, which when commissioned will allow us to provide even more secure power to the country when it is needed.
“In combination with our long-duration energy storage, flexible generation and renewable generation from biomass, we will be able to provide 4.4GW of dispatchable generation to meet demand.”
As part of the transaction, Drax has secured a right of first offer on the additional eight sites totalling 289MW that are being developed by Apatura, offering more options for its FlexGen portfolio expansion.
Drax expects that the decommissioning of older thermal generation assets, greater reliance on intermittent renewables, and growing power demand will heighten the need for dispatchable power and system support services.
This aligns with the National Energy System Operator’s future energy scenarios, which projects a possible doubling of UK electricity demand in the next few decades, as well as increase in wind curtailment and a decrease in dispatchable thermal generation.
Gardiner added: “As the UK’s network increases its reliance on intermittent renewables, more dispatchable and reliable generation will be required to help keep the lights on when the wind isn’t blowing or the sun isn’t shining.
“Through the development of our strategy we are working to create value and growth in the short, medium and long-term, aligned to the UK’s energy needs and underpinned by strong cash generation, a disciplined approach to capital allocation and attractive returns for shareholders, significantly in excess of our weighted average cost of capital.”
Currently, Drax’s FlexGen division includes long-duration pumped storage, hydro, and open-cycle gas turbines, but it does not include short-duration BESSs with rapid response capabilities.
