European Court of Justice Ruling on UK Capacity Market
16 November 2018
Gore Street, the UK's first listed energy storage fund investing in income producing assets in the UK and internationally, notes yesterday's ruling by the European Court of Justice ("ECJ") that the UK's capacity market mechanism ("Capacity Market") could be in breach of EU State Aid Rules. As a consequence, the National Grid has temporarily suspended the Capacity Market and payments for all existing agreements. The UK Government has responded by saying that it will be "working closely with the European Commission so that the capacity market can be reinstated as soon as possible". Gore Street views this development as positive as it should ultimately strengthen the importance of electricity storage to the UK electricity market.
The Capacity Market enables generators and battery projects to bid for contracts to provide back-up power to the grid during times of peak demand. The judgement by the ECJ was issued in response to a legal challenge by Tempus Energy, the clean technology firm, which argued that the mechanism for securing back up power in this way unfairly favoured fossil fuel generators over newer, cleaner technologies.
Although, in the short term, the ruling may have an adverse impact on the future revenues of GSF's projects if the position on this ruling is not clarified promptly, the Board does not expect this to be material in the longer term. Indeed, the prospective rebalancing of the mechanism in favour of battery storage generators could have a materially positive revenue impact on GSF. The Company however is studying the full impact of the ruling, the implications of which are complex and uncertain at this stage, on both the wider energy market and also on its own business and will make a further announcement in due course once the UK's position is more clear.
Alex O'Cinneide, CEO of Gore Street Capital, the Company's investment manager, commented:
"We expect that the UK government will propose new rules to the European Commission as quickly as possible and to work to restart this market in the near future. What is clear is that these new proposals will have to be positive for cleaner technologies over traditional fossil fuel generators, and we are therefore encouraged that it will further support the importance of storage to the UK electricity market. Capacity payments were a minor portion of the revenue of the portfolio and so view this on balance as containing positive implications for Gore Street's portfolio."
The Legal Entity Identifier of the Company is 213800GPUNVGG81G4O21.
For further information:
|Gore Street Capital Limited|
|Alex O'Cinneide||Tel: +44 (0) 20 3826 0290|
|Stockdale Securities Limited|
|Daniel Harris / Rose Ramsden (Corporate Finance)
Henry Willcocks / Fiona Conroy (Corporate Broking)
|Tel: +44 (0) 20 7601 6000|
|Charles Ryland / Steph Watson / Henry Wilson||Tel: +44 (0) 20 7466 5000|
Notes to Editors
About Gore Street Energy Storage Fund plc
Gore Street is London's first listed energy storage fund and seeks to provide shareholders with a significant opportunity to invest in a diversified portfolio of utility scale energy storage projects. In addition to growth through exploiting its considerable pipeline, the Company aims to deliver consistent and robust dividend yield as income distributions to its shareholders.