TSO-level strategy mitigates FCA risk: \u2018horror stories at DSO level\u2019 <\/p>\n
\u201cSo our approach to Germany was a bit more cautious before that, but we are now leaning into the market much more because things have cleared after the announcement from BNetzA,\u201d Jimenez explains. <\/p>\n
\u201cGermany is on the up now. There are still challenges around FCAs<\/a> etc, but the market is now on an uptick. We\u2019re very excited about Germany. This is our first but there will potentially be more announced later this year.\u201d<\/p>\n The challenge he refers to are FCAs, which is German system operators\u2019 way of dealing with the huge backlog of battery energy storage system (BESS) projects connecting to the grid. These restrict a project\u2019s activity in the electricity market, and we\u2019ve covered them extensively including on a recent webinar with consultancy Clean Horizon<\/a>.<\/p>\n Jimenez said the company has in general chosen to focus on large, transmission system operator-level (TSO) projects in part to face less constraints in connecting. <\/p>\n \u201cWe\u2019ve chosen to focus on TSO level projects, which tend to have less restrictions than those at the DSO level. Connecting to TSO level Germany means you need to be generally at least 200MW, which is in line with our overall strategy of doing large projects,\u201d he explains. \u00a0<\/p>\n \u201cWhat we have seen from TSOs in Germany is they have put together a paper which explains the restrictions they envision for all TSO projects. And those requirements or restrictions feel reasonable.\u201d <\/p>\n \u201cWe are not working at the DSO level. We\u2019ve heard horror stories from DSO level.\u00a0Our thesis was always that if you connect at TSO level, you would face less restrictions and we are seeing that play out.\u201d <\/p>\n The substation that the project will connect to is in the territory of 50Hertz, one of Germany\u2019s four TSOs.<\/p>\n Early-stage construction\u00a0<\/p>\n Jimenez clarifies that it is still early stage construction work with BESS suppliers and EPC services still to be contracted. Work has begun to reinforce the roads around the 15-hectare site and topsoil is being removed. <\/p>\n The firm has been relatively under the radar with the project so far. But it was asked by the municipality to make an announcement as the BESS is related to an upgrade of the nearby substation, and they wanted to show people progress at the site. <\/p>\n \u201cWe are now contracting the project with suppliers of equipment, engineering and construction services,\u201d Jimenez explains, which we will delve more into further down. <\/p>\n \u201cThe most important milestone is when it hits COD, right now it is Q4 2028 that we are targeting. There is a bit of uncertainty on that as we are still working with the grid provider on energisation date, but we\u2019ve procured long-lead items for project.\u201d <\/p>\n Going big and long-duration <\/p>\n Not only is the project one of the largest in Europe to enter construction but going up to potentially 5.7-hours would also make it by far the longest duration large-scale BESS in Germany. <\/p>\n Jimenez does clarify that it may not go all the way to 5.7-hours initially, but it will go to at least 4-hours (1GW\/4GWh), and probably more. The company is still working on optimising the duration of the project. Even 4-hours is still higher than the vast majority of large-scale projects in Germany. Only LEAG\u2019s 1GW\/4GWh project with Fluence is comparable<\/a>. <\/p>\n Part of the reason behind going so big is that it will site at a critical juncture of the future German grid, which has a similar north-south generation-demand mismatch as in the UK. <\/p>\n \u201cThis substation that the project will connect is part of the critical backbone of Germany, it is to move energy north to south and east to west. There is a very significant infrastructure project called the SuedOstLink coming through this substation, and some other interconnector projects coming through this substation. This substation is very important for the German grid,\u201d Jimenez explains. \u00a0<\/p>\n \u201cWe also found we have a really nice land location, 150m away from the grid, for a project of this scale, you need a lot of land, and this has a lot of land close to this substation, so it made sense for us.\u201d <\/p>\n \u201cFor us it is all about impact, we want to make an impact on the German market, and TSO projects are more impactful because they don\u2019t have all these restrictions.\u201d <\/p>\n Going for a longer duration is also related to BW ESS\u2019 backing by its parent company BW Group, whose management clearly has a very bullish long-term view on energy storage, something Jimenez calls its \u2018secret sauce\u2019. <\/p>\n BW ESS funds projects\u2019 construction from its own balance sheet before bringing in external financiers and offtakers during construction, which the firm believes gives it more leverage in negotiations. But for that you need a backer willing to take on construction and merchant risk. <\/p>\n Jimenez: \u201cWe don\u2019t flip projects, we are here to build these things and operate for decades. The general approach is our projects are generally longer-duration than where the market is. We look at these making money in 2040\/50, so to be robust, longer duration makes sense from our long-term ownership perspective. We\u2019re not scared of longer-duration projects.\u201d <\/p>\n Indeed, its two flagship UK projects Bramley (100MW\/331MWh) <\/a>and Hams Hall (350MW\/1,243MWh)<\/a> are well over 3-hours in duration, much higher than most other projects being built now. It also has an 8-hour BESS that won a contract in Italy\u2019s MACSE auction, though all projects in that auction are between 6 and 8-hours<\/a>.<\/p>\n Selecting suppliers and contractors <\/p>\n So when going this big, how do you approach selecting BESS suppliers and contractors? Jimenez says the firm is running a long tender process for BESS supply, which started at the beginning of 2026 and is targeting selection in Q3. It has its final list of suppliers which it is now whittling down. <\/p>\n \u201cIt\u2019s a long process but the reason is we want to align well with suppliers on this project, particularly because of the very important grid fees date (4 August 2029). We feel prepared but of course things can change so we want to make sure we hit that date,\u201d he says. <\/p>\n \u201cOur approach is we like to work with people on a long-term basis, be it developers and suppliers.\u00a0We tend to work with companies that give us priority.\u201d <\/p>\n \u201cThe bigger challenge is are there enough EPCs to build this thing \u2013 the balance sheet you need to build this is big. For a 20MW project there might be 50 EPCs, for a project of this scale the group is smaller.\u201d <\/p>\n Sungrow<\/a> has supplied its two biggest UK projects, while BW ESS hasn\u2019t revealed suppliers for other projects elsewhere yet. <\/p>\n Offtake and capex <\/p>\n On offtake and route-to-market (RTM) partners, Jimenez says: \u201cWe see a lot of interest in Germany from creditworthy counterparties. All the major utilities, all the oil and gas strategics, all the commodity traders are here, which is not surprising because it is Europe\u2019s deepest and most liquid market. There\u2019s opportunity for longer-term tolls, you have all this liquidity. We\u2019re seeing a lot of interest for this project and beginning to have those conversations.\u201d<\/p>\n We finished by asking Jimenez for a ballpark figure on how much capex is required for a project this size, but he says the figure is too commercially sensitive. \u201cEveryone else is asking that too!\u201d<\/p>\n Jimenez was a speaker<\/a> at last month\u2019s Energy Storage Summit at the Battery Show Europe<\/a>, hosted by\u00a0Energy-Storage.news publisher Solar Media and co-located with parent company Informa\u2019s\u00a0The Battery Show Europe<\/a>. <\/p>\n