Executive Summary

• SSE and Statkraft have announced the completion of the first financial swap on the Modo Energy BESS GB (2H) Index
• The value for both companies is in providing a fixed revenue stream for a portion of SSE’s battery capacity, while providing additional battery exposure for Statkraft’s portfolio
• For Modo Energy, the premise is that batteries will become essential energy infrastructure – and building assets at scale would need ways to finance them through uncertain revenues

UK electricity company SSE and Statkraft, Europe’s largest developer of renewable energy, have announced the completion of the first financial swap on a Modo Energy index – which has ramifications for battery energy storage systems (BESS) in the UK.

The Modo Energy BESS GB (2H) Index provides a measure of the revenue performance of operational two-hour utility-scale BESS in Great Britain. Under the ISDA (International Swaps and Derivatives Association) framework, Statkraft pays SSE if the index value is below the agreed strike level, and SSE pays Statkraft if it is above the agreed strike level.

The value for both companies is in providing a fixed revenue stream for a portion of SSE’s battery capacity, as well as additional battery exposure for Statkraft’s portfolio.

In a blog post, Modo Energy congratulated both teams and said the deal had ‘given the battery energy storage industry another way to manage revenue risk’ as well as a ‘practical example of the new financial market developing around these assets.’

“We started Modo Energy because we always believed batteries would become essential energy infrastructure,” the company said. “And that an industry building assets at scale would need ways to finance them through uncertain revenues.

“It would need counterparties willing to take the other side of that risk, and a benchmark they could agree to use,” Modo Energy added. “That conviction shaped what we built. Seeing SSE and Statkraft use our index in a swap is a proud moment for us.”

“As one of the UK’s leading energy traders and route-to-market providers, SSE Energy Markets is committed to developing innovative solutions that help participants manage risk and unlock investment in flexible energy infrastructure,” said Gordon Bell, managing director of SSE Energy Markets.

“This transaction demonstrates the growing maturity of battery storage as an asset class and provides a new way to manage exposure to battery revenues. We’re delighted to partner with Statkraft on this first-of-its-kind transaction, which we see as an important step in the development of deeper and more liquid battery revenue markets.”

Image credit: Statkraft