Drax has signed an agreement with Apatura Ltd to acquire three battery energy storage system (BESS) projects, which will provide capacity totalling 260 MW when fully commissioned.
Drax will pay a fixed amount of £157.2 million in staged payments between 2025 and 2028, reflecting construction milestones and including payments to Apatura linked to their delivery of the projects. Completion of the acquisition of the first two projects is expected to occur in 2025 with completion of the third project expected in 1Q26.
Drax Group CEO, Will Gardiner, commented: “This acquisition is our first investment in short duration storage as part of our FlexGen portfolio, supporting UK energy security and a clean power system. We are looking forward to working with Apatura on the development of battery storage, which, when commissioned, will allow us to provide even more secure power to the country when it is needed. In combination with our long duration energy storage, flexible generation and renewable generation from biomass, we will be able to provide 4.4 GW of dispatchable generation to meet demand.”
Gardiner added: “As the UK’s network increases its reliance on intermittent renewables, more dispatchable and reliable generation will be required to help keep the lights on when the wind is not blowing or the sun is not shining. Through the development of our strategy we are working to create value and growth in the short, medium, and long-term, aligned to the UK’s energy needs and underpinned by strong cash generation, a disciplined approach to capital allocation, and attractive returns for shareholders, significantly in excess of our weighted average cost of capital.”
The portfolio consists of three ready-to-build BESS sites, two in Scotland and one in Northern England.
Construction on all three sites is expected to commence in 2026 with the first site in Scotland due to be operational in 2027, with the second and third sites expected to commence operations thereafter. Apatura will manage the development of the projects and bear the majority of the construction risk (cost and delay), reflected in the fixed cash consideration and contractual protections.
Linked to the transaction, Drax has agreed the option of a right of first offer over a further eight sites (289 MW) being developed by Apatura, creating optionality for the continued development of the FlexGen portfolio.
Drax believes that the retirement of older thermal generation assets and increased reliance on intermittent renewables, as well as an increase in power demand, will drive a growing need for dispatchable power and system support services, creating long-term earnings opportunities for, and value from, the group’s FlexGen portfolio. This is in line with National Energy System Operator’s (NESO’s) Future Energy Scenarios which show a potential doubling of total demand for electricity in the UK over the coming decades, as well as an increase in curtailment of wind and reduction in dispatchable thermal generation.
The group’s FlexGen business currently comprises long duration pumped storage, hydro and open cycle gas turbines (OCGTs), but not short duration BESS with fast response capabilities. Drax believes that once commissioned, two-hour BESS provides as an attractive entry point into the short duration storage space, and complementary to the group’s FlexGen business, allowing it to provide a wider range of system support services, as well as increased access to wholesale and balancing markets.
Once the BESS assets are operational, the group’s FlexGen portfolio will comprise 1.8 GW of long and short duration storage and flexible generation across nine sites in England, Scotland, and Wales, with access to demand side flexibility through the group’s industrial and commercial customer portfolio. Drax Power Station provides 2.6 GW, taking the group’s total to 4.4 GW of dispatchable generation.
By operating BESS as part of an integrated portfolio across multiple technologies and sites, Drax expects to access more opportunities to provide services and support to the system, widening its earnings opportunities.
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