Energy Storage Growth and System Resilience: What Changed This Week — 27 Dec 2025 - 11 Jan 2026

Opening Paragraph The past two weeks marked significant developments in the GB energy market, with severe cold weather driving power demand to a seven-year high and grid operators leaning heavily on flexible resources like battery storage and interconnectors. New large-scale battery projects, regulatory changes, and volatile market conditions underscore the growing importance of storage in ensuring system resilience. These shifts are not isolated events—they are structural indicators of how the GB energy market is evolving in response to weather extremes and renewable intermittency.

Key Developments

1. Severe cold snap pushes demand to seven-year high

On 5 January 2026, temperatures plummeted to -12.5°C, driving UK electricity demand to a staggering 47.3 GW, the highest since 2019. National Grid ESO intervened to maintain grid stability, reversing interconnector exports and purchasing power at prices as high as £1,040/MWh. Low wind output during the period further tightened system margins, amplifying the reliance on flexible resources like battery storage. For storage operators, the event highlighted the value of peak shaving and arbitrage, with prices often exceeding £1,000/MWh. ICIS/Montel, 10 Jan

2. Gresham House adds 397MW to its battery portfolio

Gresham House Energy Storage Fund expanded its position in the battery market with the acquisition of two projects totalling 297MW and the completion of a 100MW facility, bringing its total capacity to 794MWh. This surge in capacity reflects investor confidence in storage as a key asset class amid volatile power prices. Developers should note the importance of scale in capturing wholesale arbitrage and balancing revenues. Current News, 8 Jan

3. Tesla secures 1 GWh Megapack project in Scotland

Tesla has signed a contract for a 1 GWh Megapack battery storage system in Scotland, marking a significant expansion in grid-scale storage. This project will help manage renewable intermittency and strengthen grid stability in the region. The scale of this deployment highlights the increasing demand for long-duration storage solutions. Energy Storage News, 7 Jan

4. Balancing Mechanism prices spike to £500/MWh

On 8 January, National Grid ESO paid up to £500/MWh to secure additional generation during an evening peak. The tight conditions reflected low renewable output and high demand. Battery operators participating in the Balancing Mechanism captured exceptional revenues, often earning multiples of their typical returns in a single settlement period. BMRS, 8 Jan

5. Viking Link interconnector achieves full capacity milestone

The Viking Link interconnector between GB and Denmark reached its full operational capacity of 1.4 GW in early January 2026, enhancing cross-border energy flows. This additional interconnection capacity will provide greater access to Nordic renewable energy, which may dampen GB prices during surplus periods but also offer import flexibility during scarcity events. Traders should incorporate Viking Link flows into their models to optimise arbitrage opportunities. National Grid, 8 Jan

6. Ofgem reforms accelerate grid connections

Ofgem announced new measures to streamline grid connection processes, potentially reducing the 5-7 year wait times for new battery and generation projects. Developers with projects in the pipeline could see significant improvements in project economics, as faster connections reduce financing costs and enable earlier revenue generation. Ofgem, 27 Dec

Why This Matters The developments over the past two weeks underscore the increasingly critical role of energy storage in ensuring grid resilience amidst volatile market conditions. The severe cold snap and low renewable output demonstrated the system's reliance on flexible capacity, with battery operators and interconnectors stepping in to fill gaps. The record-breaking balancing and wholesale prices highlight lucrative revenue streams for storage operators—especially those participating in multiple markets like the Balancing Mechanism and wholesale arbitrage. Investments in utility-scale projects, such as Gresham House's 397MW expansion and Tesla's 1 GWh Megapack in Scotland, signal a shift towards larger, more efficient storage assets. These projects not only validate the business case for grid-scale storage but also set new benchmarks for project economics. However, the growing scale of storage deployments will intensify competition in ancillary service markets, compressing margins for smaller operators. Meanwhile, the operational launch of the Viking Link interconnector is reshaping GB's price dynamics. By providing access to Nordic renewable energy, the interconnector introduces new arbitrage opportunities but also creates challenges for storage operators as price spreads narrow during import periods. Traders and developers need to incorporate interconnector flows and Nordic weather patterns into their strategies to maximise revenues. Ofgem's grid connection reforms further accelerate market entry for new projects, potentially unlocking a wave of storage capacity over the next few years. While this may increase competition, it also addresses one of the sector's most significant bottlenecks—connection delays. For developers, the ability to bring projects online faster will improve financing conditions and reduce risk, offering a significant boost to deployment rates. Looking ahead, the GB energy market will continue to experience volatility driven by weather extremes, renewable intermittency, and geopolitical pressures on gas supplies. Battery storage operators and traders must remain agile, leveraging advanced forecasting tools and optimising market participation to capture value in this dynamic environment.

Picking Take Extreme weather events and grid stress aren't outliers—they're the new normal. When National Grid pays £1,040/MWh to maintain stability, storage operators should take note: the revenue potential during scarcity events solidifies batteries as critical grid assets. Developers need to scale fast, but those without advanced multi-market strategies risk being priced out as competition heats up. ```markdown

Related Reading - Battery Revenue Stacking and Market Dynamics: What Changed This Week — 25-30 Dec 2025 – Explores battery storage opportunities in balancing services and wholesale markets - Battery Storage Expansion and Revenue Optimisation in GB: What Changed This Week — 17-23 Dec 2025 – Discusses GB battery storage growth and regulatory reforms ```