So will Pivot be able to raise the huge investment that will be needed to deliver this ambition, and what are the risks?
The great opportunities for battery-based storage combined with the expected growth in electric vehicles is an attractive proposition for investors. But, as Allen acknowledges, there is still Brexit to come, and snap policy changes outside the private sector’s control always make for risk.
“We have a view that storage is the greenest solution when it comes to flexibility – compared to interconnectors and gas fire plants and pumping hydro-plants.”
He talks through Pivot’s investment model and how batteries can provide a number of services and income streams. The first is in trading electricity, filling up during the cheap time and selling back when demand is highest; the second is in ancillary services, providing a balancing mechanism and frequency response to the National Grid; and the third is to act as a backstop to the capacity market.
The capacity income stream was never planned to be huge, he says, but he doesn’t foresee the market stalling permanently, referring to the judgement by the European Court of Justice in November 2018 which ruled the UK capacity market to be illegal.
He expects that Pivot will appeal to investors who take the view that the EV market will scale up and that demand for charging will rise in future. The government announced plans last year to ban petrol and diesel cars by 2040, and the past four years has seen a surge in EV registrations, up from 3,500 in 2013 to more than 195,000 by the end of January 2019.
But that isn’t to say Pivot is undertaking a risk-free venture. “There are always risks: policy and regulatory risks – those things always scare investors – Brexit, of course. But if you look at the spread of the wholesale market, it’s an enormous opportunity – particularly because you can be paid to take surplus electricity.”
He doesn’t give a figure on the payback period and says the rate of return will be different for each site. The key, he says, is to be aligned with what the investment criteria required. Interest in investing in Pivot is coming from multiple sources, he says – incumbents in the market (power companies and oil companies alike) and also from infrastructure and pension funds.
“To cement anything new there will always be challenges, but investors so far have been positive. The key is making sure we have the right investment partners on board – partners who believe in the vision.”
Other risks include the bottlenecks in the EV industry, such as the lead time from placing an order for an EV to actually having it roll off the production line and delivered to the customer.
“There are enormous opportunities for flexible storage. We are managing the controllables, which is all we can do. At Pivot Power we need a business plan that morphs to meet the needs of energy systems; the adaptability mindset is within our DNA.”
What about the emergence of competition? Allen is relaxed: “We would welcome others replicating what we’re doing. Our skill is about trading to maximise revenue – that’s more our focus.”
In terms of aggregation, he says, the company is working to develop some software in-house as well as collaborating with others. “I don’t see the point in reinventing the wheel to predict volatility."