Overview & Strategy

The UK Electricity system, an Opportunity for Change

The UK electricity system is among the world's most advanced, evolving from a reliance on large coal, gas, and nuclear plants, which were straightforward to control and respond to national demand.

As traditional plants are phased out, thousands of decentralised generators are reshaping electricity flows. The National Grid ESO collaborates with the energy sector to innovate and adapt, ensuring reliable electricity supply across the country.

With the UK's shift to net-zero carbon emissions, there’s a growing demand for renewable and stable power solutions. This transition from base-load fossil fuels to flexible gas and renewables like wind and solar brings challenges, including instability from variable energy sources.

To address this, the UK is investing in small, flexible power plants that provide stable, low-emission electricity when needed. This dynamic market for small-scale generation and storage supports the regulatory framework, balances the national grid, and offers reduced risk for investors.

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Strategy & Business Model

Mast Energy Developments PLC’s (MED) strategic intent is to acquire, develop and operate multiple small-scale flexible-power generation plants, with a goal to reach a 300+ MW portfolio. To achieve this, our business model is based on the following:

Investing, via development and acquisition, in small-scale flexible-power sites that respond to the needs of an evolving energy market

Optimising costs and time to commissioning

Remaining flexible on stages of completion

Seeking long-term supportive and financially robust joint venture and investment partners

Execution Process

At MED, the structure of project teams follows a highly specific procedure to optimise efficiency and maximise revenue. Once a greenfield project has been commercialised, an Operations Team is established for responsibility of the project site. The estimated target development timeline from acquisition to production is 9 to 12 months. For a brownfield project, we apply our proven overhaul process. See here

Project Identification Due Diligence & Acquisition

1

Grid & Gas Connection

2

Permitting Planning

3

Construction Agreements

4

Power Purchase Agreements

5

Capex Planning

6

Construction, Commissioning, Commercial Operations & Steady Production

7

Site Operational & Performance Management

8

Revenue Generation
Model

Revenue is generated from four well diversified and reliable sources:

Power Purchase Agreement (PPA) - generating trading revenue via PPA with Statkraft from arbitrage opportunity in electricity price volatility vs input costs.
Embedded Benefits - payments based on electricity generated (irrespective of electricity price) being delivered straight into national grid distribution system.
Capacity Market (CM) - guaranteed minimum payments from government to provide capability (capacity payment) up to 15 years.
Balancing Mechanism (BM) - additional income earned to balance the national grid when there are deficits between supply and demand.

Power Purchase Agreement (PPA)

The revenue generation model begins with natural gas supplied via a fixed connection from the GB national gas grid. This gas fuels reciprocating engines, which efficiently generate electricity. The electricity produced is then exported through a dedicated connection to the GB national electricity grid.

This seamless process allows for reliable electricity generation and distribution. Revenue is generated through a long-term Power Purchase Agreement (PPA) with an offtake partner, who trades and purchases the electricity from MED, ensuring a steady income stream while contributing to the national energy supply.

Embedded Benefits

Embedded Benefits in the UK are payments or cost savings available to smaller electricity generators, typically those connected to the distribution network rather than the national transmission system. Gas-peaking plants connected at the distribution level often qualify for these benefits, including Generation Distribution Use of System (GDUoS) charges.

Revenue Generation through Embedded Benefits:

Avoided Transmission Charges: Embedded generators avoid paying Transmission Network Use of System (TNUoS) charges, which are significant costs for larger, transmission-connected plants. This results in reduced operational costs.
Triad Avoidance Payments: Gas-peaking plants can earn revenue by generating during the three winter "Triad" periods of highest national demand. This helps reduce strain on the transmission system and provides financial incentives.
Generation Distribution Use of System (GDUoS) Payments: Some embedded generators may receive GDUoS credits for helping to reduce demand on the distribution network. These payments compensate them for supporting local network efficiency by reducing the need for power to flow from the national transmission system.
Reduced Balancing Services Use of System (BSUoS) Charges: Embedded generators may face lower or no BSUoS charges, which are applied to cover the cost of balancing the electricity system.

Embedded Benefits, including GDUoS payments, provide financial advantages to gas-peaking plants, enhancing their economic viability and incentivising local, flexible energy production. However, recent regulatory changes have sought to reform these benefits, aiming to align incentives more closely with system-wide cost efficiency.

Capacity Market (CM)

The Capacity Market (CM) in the UK is a mechanism designed to ensure a reliable electricity supply by providing payments to energy providers in return for guaranteed availability during times of system stress. Gas-peaking plants often participate in this market due to their ability to deliver quick, flexible generation.

Revenue Generation through the Capacity Market:

Capacity Agreements: Gas-peaking plants secure contracts through competitive auctions held by the government. These agreements guarantee a steady revenue stream in exchange for committing to be available to generate electricity when needed.
Availability Payments: Plants receive regular payments for their capacity, regardless of whether they are called upon to generate, providing financial stability.
Stress Events: If the grid experiences a capacity shortfall, contracted plants must deliver the agreed output or face penalties, incentivising reliability.

The CM offers a predictable revenue source for gas-peaking plants while supporting grid stability, complementing other market mechanisms like the Balancing Mechanism.

Balancing Mechanism
(BM)

The Balancing Mechanism (BM) in the UK is a key part of the electricity market, operated by the National Grid Electricity System Operator (NESO), to ensure real-time balance between supply and demand. Gas-peaking plants, which can quickly ramp up or down their output, play a significant role in this process.

Revenue Generation through the Balancing Mechanism:

Bids and Offers: Gas-peaking plants submit bids (to reduce output) or offers (to increase output) into the Balancing Mechanism. The NESO accepts these bids/offers when adjustments are needed to balance the grid.
Pricing: If a gas plant's offer is accepted, it is paid the agreed price for increasing generation. Similarly, if its bid to reduce generation is accepted, it may receive compensation.
Market Dynamics: The price paid often reflects the urgent need for balancing services, meaning gas-peaking plants can generate significant revenue during periods of high demand or system stress.

By providing flexible, rapid-response energy generation, gas-peaking plants leverage the BM as a key revenue stream.

Smaller grids can only manage smaller power plants, requiring peaking plants to be installed in areas of need.

Grid Solutions

Plants comprise multiple small reciprocating engine gensets (1.5 – 4 MW) housed in containers that include noise abatement and control systems.

Modular Gensets

Plants are unmanned with remote dispatch of gensets through data connection.

Management

What is Flexible Power?

Flexible power is the process of timing energy supply so it can be used during periods of peak demand.

Input: Natural gas piped to site via fixed gas connection from the GB national (gas) grid

Process: Electricity generation: Gas fuels reciprocating engines, which generate electricity

Output: Electricity export: Electricity exported via fixed electricity connection to the GB national (electricity) grid

Revenue Generation: Offtake partner trades and purchases electricity from MED under a long-term PPA agreement