Energy storage seen as holy grail

Across a number of markets, renewable energy is reaching price parity with traditional sources.

Yet, as Denham Capital managing director Justin DeAngelis put it today while speaking at Infrastructure Investor's 2016 Berlin Summit, one issue remains: “You can't build a system on renewables [due to] volatility.” 

And while he foresaw a way to mitigate the problem, he doubted the solution would be scaled up very soon. “As an engineer at the core, storage is the holy grail of power at every level. The issue has been economics.” 

But Tobias Reichmuth, chief executive and founding partner of SUSI Partners, reckoned those economics were shifting favourably as storage technologies keep on progressing.  

Already in Hawaii, Reichmuth noted, renewables paired with energy storage could be offered at a cheaper rate than traditional grid power, which is provided primarily through diesel burn.  

In 2014, he said, grid power production costs were above 40 cents per KWh across the Aloha state, against 32 cents for solar with storage deployment.

“In 2016, it is 27 cents per KWh, produced at 6 to 7 percent, with storage cost of 19 cents per KWh. That cost will probably decline quite fast and within five years we could be competitive in not only islands, but on the mainland.”

SUSI touts itself as the first firm to create a fund specifically targeting the storage space, recently securing a €66 million commitment from the European Investment Bank as well as another €50 million commitment from Engie for its Renewable Energy Fund II.

Several conference speakers alluded to situations where storage could become useful throughout the energy space. During the course of the conference, Bradford Nordholm, CEO and managing director of Starwood Energy Group, noted that 37 states are now moving toward renewable portfolio standards, which is coupled by a “massive retirement” of coal-fired plants. With that in mind, Nordholm said that his firm sees the deployment of storage assets as a means of augmenting the existing grid.

While some scepticism arose during a brief Q&A with Reichmuth around whether it is not too early for investors to engage with the storage space, he pointed to the massive deployment of renewables projects as providing the ground from which storage would inevitably grow.

“Suddenly you have all of these itty bitty wind and solar projects and the cost for balancing is getting expensive.” That provided a robust business case for storage, he said.

In light of the novelty of storage technology, Reichmuth said that his fund currently targets projects with a payback of 10 years or less. “You need to be very conservative in your market estimates,” he concluded.