Drax has inked a ten-year tolling agreement with Fidra Energy for a 250MW battery energy storage system (BESS) in West Burton, UK. This deal marks a strategic pivot for Drax, allowing it to expand its FlexGen portfolio without upfront capital costs. Under the agreement, Fidra Energy will handle construction, maintenance, and availability of the BESS asset, while Drax will pay an annual tolling fee indexed to the UK consumer price index. Drax will retain all operational revenues except for capacity market earnings.
The contract is contingent upon Fidra reaching a final investment decision by the third quarter of 2026 and commencing commercial operations by the second half of 2029. Notably, the grid connection for the project is already secured, with a targeted commercial operation date set for 2028. Drax views this arrangement as a capital-light strategy to bolster its BESS capacity, complementing its physically owned assets.
Drax Group CEO Will Gardiner emphasized the importance of flexible generation technologies like battery storage in supporting a secure, affordable, and clean energy system for British homes and businesses. He highlighted that this first BESS tolling agreement is a significant step towards achieving a gigawatt-scale pipeline of battery storage opportunities. This deal follows Drax’s recent acquisitions of Flexitricity and three battery storage developments, further solidifying its commitment to the FlexGen portfolio.
The agreement underscores Drax’s strategy to create growth and value in its FlexGen portfolio, aligning with the UK’s energy needs. The company aims to achieve strong cash generation, disciplined capital allocation, and attractive returns for shareholders. By combining physical asset ownership with the optimization of third-party assets through various market structures, Drax is positioning itself as a key player in the UK’s energy storage sector.
This development could spur further investment in battery storage projects, encouraging other energy companies to explore similar tolling agreements. As the UK continues to transition towards a cleaner energy system, such partnerships may become increasingly common, fostering innovation and competition in the energy storage market. The deal also highlights the growing importance of flexibility in the energy system, as renewable energy sources become more prevalent. By investing in battery storage, Drax is not only diversifying its portfolio but also contributing to the stability and reliability of the UK’s energy grid.