Insights on Greenvolt Power’s BESS Operation Management Strategies

0:00Introduction

Dr Simon Engelke

0:00And welcome everyone. Thank you so much for joining us for the Battery Insiders podcast here live from China. Currently we're attending the CLNB conference from Shanghai Metals Markets. I'm very excited to have this discussion now on BES, energy storage systems, and from an asset management company perspective. I'm delighted to have Antonio with us today

Antonio Montoto Rojo

0:28to share your perspectives. Thank you, thank you, Simon, and thank you to your podcast for the

Dr Simon Engelke

0:34opportunity to talk here, Senonor. For sure. So maybe if you could introduce yourself a bit with

Antonio Montoto Rojo

0:39your vision and the mission of the company for our listeners. Sure, sure. Greenball is a Portuguese-based company, but with a sound office around Europe, United States, Japan, and Indonesia. That is focused in developing green energy facilities, based on solar, wind, energy storage, as an enable technology for our objectives in question of clean energy. And also we have a very important branch in biomass production where we are leaders in Portugal and we have also facilities in other countries as the UK. Fantastic. Maybe if you could share a bit more

Dr Simon Engelke

1:19about some of the European projects, what specifically we are doing there as well. Sure.

Antonio Montoto Rojo

1:23Yes, Greenball Power is specialized in developing projects in different stages. And we have a very strong background of some markets, for instance, Poland, Hungary, Italy, or UK. And through the work of our people on these markets, we have achieved a very important portfolio of storage projects to be developed in the next years. Some of them are located in Poland, where thanks to the local conditions,

1:55The Polish portfolio, Hungary and the wider pipeline

Antonio Montoto Rojo

1:56especially the capacity market conditions and the economy range to absorb these technologies, facilities. We have achieved a portfolio that now is more than 1.4 gigawatts in four hours storage solutions to be developed and to be constructed prior to 20 and 28. And these are secured by the contract capacity for the capacity market contracts. But we also have a project in Hungary where we were awarded in the last auction for a standalone in history for supporting the day ahead and the frequency markets there. And also, they have other projects in the UK, but also an important portfolio of projects to be developed in the next year in countries like Italy, Germany, or Spain. Fantastic. So quite a few projects. And if you now look at

Dr Simon Engelke

2:51these projects, right, if you could maybe share some of the procurement strategies to deliver these projects, especially in the short timeframe you have available. Yes, I think that the strategies,

Antonio Montoto Rojo

3:02first to think in a long term strategy, is that they need to be very related to the very dynamic situation of the energy storage market. I think there is a roller coaster dynamic, both in price, but also in the technology features. And one of the most sensitive values that we have been managing in the past year is having the more accurate data possible regarding what is the capex situation, both now and in the next year, and also how the current features that the battery suppliers are offering impact in the real opex and in the real possibility of this storage. For instance, 10 years ago, an energy storage system for utility usually have only three years of warranty,

3:54From three-year warranties to twenty-year assets

Antonio Montoto Rojo

3:54and extension warranty were not usually easy to achieve. And now everybody in the sector know that we can achieve more than 20 years in certain profiles. Then having this mix of technological, economical and also market knowledge, I think are the three key factors to decide where and how we need to go

Dr Simon Engelke

4:21in different countries. Thank you for sharing. So a big difference there between three and 20 years. So that's good to hear. You already mentioned capex. Maybe if you could share some of your ways you have to have become managing the capex, and also some best practices for that as well.

Antonio Montoto Rojo

4:37Well, yes, we don't consider the capex, in fact, like the most important factor, it's an enable factor, but it depends a lot on the market conditions. In high profitability markets, it's better to secure the project as soon as possible with competitive capex, but especially with the most reliable steps to achieve the project in the shortest time and to acquire this revenue as soon as possible. While other market that's only possible if you have a very well defined cost for the investment, then it depends on this. But always, always considering the maximum reliability in your partners. Okay, we only trust in companies that are considered top tier companies by the main indexes. And if are out of this, despite the numbers, could be okay, we don't consider a realistic perspective. Okay, but that's the point. And apart from that, for small projects, we see more easy to try to close a

5:52One EPC for small projects, master supply for portfolios

Antonio Montoto Rojo

5:52full supply from one EPC or similar. I'm thinking 20 megawatts or less sizing project. But for the big portfolio, because it's very well scheduled in the next years, I think it's better to have a good matter supply agreement with a very reliable supplier for the key elements and try to collect this advantage of managing a big volume to secure the best conditions and also to say to secure the best threatment by the potential suppliers. Excellent. And maybe also if you can go from

Dr Simon Engelke

6:32some capex to opex, if you could also maybe share some best practices about opex. And also for us to understand like what you spend your most money on in the opex. Is it bad analytics, tone management, etc, etc?

Antonio Montoto Rojo

6:45Yes, the opex, we... This is curious because while in capex, it's more easy to differentiate what are the component of the capex. In the opex, we have to define our own criteria because depending if you're looking for the perspective of the annual management cost regarding taxes, regarding energy asset managers, regarding the local structure costs that are variable in every country. And after that, is the fixed and secure cost that implies the maintenance of the facilities. Then we try to differentiate firstly, and this is sometimes difficult because you need to know a very... You have a very strong knowledge about the tax and the cost structure of the market. But after that, the past year, there was a vision of how to say one-off project with 10 to 15 years and after a new ones. And we are now moving to a project that can be managed for more than 20 years. And we need a capex

7:52Opex, and designing for twenty years instead of ten

Antonio Montoto Rojo

7:52that alerts and fit the lifetime of the technology to, for instance, the option to list the terrain, the option to prolong, to extend the connection authorizations. Then I think we are moving from medium-term projects to long-term projects in the same case as TV or wind. I think we are in that transition, but also depend on cycling, on what are the most attractive revenues. Because you know that degradation will be fully different in a two-hours market for frequency and only one cycle per day. Or if you go to a very profitable energy market with two cycles, but with frequency... At the end, there is not a magical formula, but I think it's linking very well the revenue scheme and the market scheme with the operational. It's the formula to have a capex and the durance and how the system will perform along the time.

Dr Simon Engelke

8:56And you mentioned like a range of different projects in different countries we're doing. And maybe also to stay a bit more on the OPEX question, are there any examples you can share of something maybe even surprised you? Because you said that even between countries it can vary a lot also between application right use cases. But maybe on the countries, any takeaways for how does it differ between the UK, let's say, compared to Portugal or Italy or is there anything you could share?

Antonio Montoto Rojo

9:23Yeah, despite I'm not an expert in the grid integration policies, but what I can perceive is that the different blocks and different ways to manage. The UK is a highly differentiated for the rest of Europe. And Ireland is a mix between UK criteria and European Union criteria. But in those markets,

9:47Why the UK is different, and Poland's cable pooling law

Antonio Montoto Rojo

9:47it's very, how to say, there are a lot of greater freedom for managing the plants. It's very clear and very transparent market to develop and it's very easy. Other markets are more, how to say, more traditional, more monolithic. And you need to know what are the limitations that the regulation could have to the real possibilities of the storage. But at the end, what you have is a set of fixed costs that sometimes are changed, a set of fixed limitations in the capability to connect. Sometimes there are limitations between the rate of the energy you can install and the power. And sometimes in that, you can put parallel projects and you can oversize and other, you can't. Then there are big differentiations for instance between Poland with the improvement on past year of the cable pulling law. that there is a high flexibility criteria to distribute a system. And for the audience, if they don't know, cable pulling at the end is a national law that regulates the hybridization in facilities where you can oversize the capacity while you keep a high level regulation system, an ENS, or to control that the power is according to the real capacity of the connection point. In Spain, Italy, other countries, it can be done, but there is not a national regulation. It's more, what to say, more technical and more difficult to achieve. And the point is that they, I think all the market will evolve to this adaptation because it's, at the end, it's a, it's a way to save a lot of money in investment for their own TSO, for their own transmission regulation companies. And in the next five years to ten, probably we will have a, absolutely,

11:46Hungary's capacity market obligations

Antonio Montoto Rojo

11:47to say, very, very clear panorama and more expertise in, in managing big markets and not one by one. That, that, that's a point. And also, for instance, the, the OPEX and the, and the technology selection depend a lot of, for instance, the contract you have. In, in, in Hungary, you have a minimum, a minimum obligation of 10 years operating in, in a profile of conditions. And after that, we, you have also other obligations depending on the project, but you have an EOL configuration and offline configuration that this is, I think, very new in Europe. Also, the capacity market is mandatory to, to, what to say, to, to follow the same criteria that the traditional gas or coal plant, and you need to achieve, in the case of a batteries, a 17 year of EOL with a maximum deviation of 5%. Then, it's a, then the, the restrictions are, are important and we need to take that into account because the impact in, in the, in the CAPEX and also in the OPEX, if we consider augmentation as a part of OPEX, could be absolutely a, a surprise if you don't take that into account when you design and you, and you prepare this sort of offers. Okay. Then, at the end, revenue scheme and contract scheme, off-taker scheme, you need to, to prepare a, a, a, a complete, a complete, a pool of, of, of, a condition and, and make your assumption over, over this. Great. So now talk a bit about the CAPEX

Dr Simon Engelke

13:23and OPEX and now I'd like to go with your perspective, right, from an asset management company, what type of services bring in revenue to the best, right? Like, is it more, you know, frequency regulations as backup systems, mix, could share a bit more on the application you see as being attractive, maybe also any differences you see across markets you look at? Well, my, my, my opinion,

13:44Ancillary services now, energy revenue later

Antonio Montoto Rojo

13:44my opinion regarding the revenues is that there are, uh, early adopter or, or, or, or, or, or early, early, uh, player, uh, business in, in, in secondary market and in, in auxiliary services and long-term business in the energy. The long-term business in the energy is for, is a conservative perspective because at the end, except that there will be, uh, there are surprising the future. It's a, it's a, it's a fixed revenue and a low profile revenue. While the, for instance, we are talking about frequency intradays or, or, uh, energy balance. I mean, those related to, to management of the, of the, of the short-term energy and balance, uh, are, how to say, the, uh, size limits. The, in every market, they have a, a, a, a maximum, a maximum capacity to cover. They are, in most of cases, limited by the own budget of the, of the government to do that. Then the, the, the perspective of making business in this sort of, uh, uh, uh, services at the end will be focusing in, in very, very specific project. I, I, I think that the, the early case of United States and, and here of UK have, uh, uh, uh, distortionated, have, uh, modified the vision that, uh, some investor have over the profitability of batteries. And I think that the, the gold age, uh, in this case is only two, three years, uh, period. And after that, you need to think in a long-term, uh, using, uh, more conservative, uh, profitability and, and with a big, uh, degradation. Because as you know, the energy associated markets, uh, usually have, uh, is more demanding there of, uh, of, uh, use of the battery per, uh, per, uh, money receipt. Okay.

15:39Co-location, hybrid schemes and seasonal storage

Antonio Montoto Rojo

15:40And that, that, that's the point. Um, the, the current scheme, especially in Europe is also because of the CAPEX, uh, reduction and also the, the, the, as I told the, uh, better adjustment of the energy storage system to the, to the rest of the generation is that the collocation schemes, supplement schemes, a hybrid scheme, as you can see in the, in the, in the, in the, in the connection structure will be for sure a, a, a very interesting, uh, industry, industry, uh, a growing business in the, in the future. Okay. And those more in country with unbalanced intergeneration and production or unbalanced in the, in the hours of production and the hour of consumption, that could be in Spain. And balancing where you produce and where you consume that could happen in, in UK or, or in Italy. And, uh, for other technology, because the deviation of technology of battery technology now is a 90% to lithium, but for, for next technology that will come in the next year, also for the, for the seasonal, uh, storage that it will be, uh, impossible to avoid if you can, if you want to cover the one, two months in, in the north of, uh, Europe countries to, to, to solve that situation where you don't have neither too much wind, neither sun, uh, and there are other technologies that, uh, gas, uh, coal in the case of Poland. Then I think, I think that we are in the, how to say in the, in the, in the first episode of a very large, uh, series movie to, for a storage in the, in the market.

Dr Simon Engelke

17:19Fantastic. I think with this, we're, we're out of time, but we want to thank you, Antonio, for sharing your insights on BES, especially from this management, as management perspective. I also want to thank SMM, Shanghai Metals Markets, for hosting us today here at CLNB in, um, near Shanghai. And also, you know,

17:35Closing remarks

Dr Simon Engelke

17:36all, thank you all of you listeners for listening into the Battery Insiders podcast. If you're interested in listening to more of these episodes, be free to go on Spotify, Apple Podcasts, YouTube, or anywhere else you listen to your podcast. You can also subscribe on batteryinsiders.com. With this, thank you all,

Antonio Montoto Rojo

17:49and speak soon. Thank you very much. Thank you very much.