Drax Group (LSE:DRX) has signed its first tolling agreement for battery storage, securing long-term access to 250MW of capacity without taking on construction or maintenance risk.
The deal, with developer Fidra Energy, gives Drax full control over a two-hour duration battery energy storage system (BESS) being developed at West Burton in Nottinghamshire.
Under the agreement, Drax will make annual inflation-linked payments over ten years in exchange for dispatch rights and revenue from operating the asset. Fidra will remain responsible for building and maintaining the battery.
Once operational in 2028, the project will provide 500MWh of fast-response storage, powered up when renewable generation dips and feeding into the grid during periods of high demand.
“This is an important step in our ambition for a gigawatt scale pipeline of battery storage opportunities,” said Will Gardiner, chief executive of Drax.
“Flexible generation technologies like battery storage will support a secure, affordable and clean energy system for British homes and businesses.”
Drax said the deal offers returns significantly ahead of its weighted average cost of capital, forming part of the group’s FlexGen strategy, which combines ownership of battery assets, third-party optimisation services and its own open-cycle gas turbines (OCGTs).
At a trading update last month, the FTSE 250 group said from 2027 it would target underlying profits of £600-700 million per year, before development expenditure, with the FlexGen business anticipated to become a larger contributor over time, driven by increasing UK demand and reliance on intermittent renewables.