Sector focus: Storage

Energy storage capacity will multiply 122-fold by 2040, according to BloombergNEF. The effects of this storage surge, if it materialises, will be truly revolutionary for the global energy system. “The electricity value chain has been really quite stable for the past 100 years,” Ross Israel, head of Global Infrastructure at QIC, told Infrastructure Investor in September. “But that is all now changing as renewables, energy storage and decentralised microgrids converge.”

But should we believe the hype? Certainly, not all fund managers see immediate value in the technology. Kai Rintala, managing director at Taaleri Energia, argued last April that energy storage is something for the future rather than the present. “We ask if storage capacity would actually help the performance of our existing portfolio,” he says.

“This does not work commercially today. Whether it works in a year, or two years, or three years, that’s the debate, and we will keep an eye on it.”

Keeping the lights on

While the right time to invest in storage will depend on a host of calculations, the energy systems of the future clearly need robust storage capacity in order to function reliably. The major power cut that struck the UK in August 2019 can be traced partly to a lack of energy storage infrastructure. With just 472MW to cover a 1.9-GW outage, the lights went out for more than a million people.

Infra funds can contribute to the solution by co-locating wind or solar investments with storage facilities. “Co-location is an attractive way to mitigate the relatively small-scale and modest level of contracted cashflows that you sometimes find with standalone storage projects,” according to Gustavo Coito, director of energy storage at SUSI Partners. He told Infrastructure Investor in September that this can help “to attract more conservative sources of capital such as project finance”.

Rapid growth

In a promising sign, Quinbrook Infrastructure Partners announced in June that it will develop a 690MW solar-generation project alongside a 380MW battery-storage system in
Nevada.

The batteries will be able to store power generated from the desert sun during the day, then deploy it after dark when power usage peaks in Las Vegas.

Such investments are being made possible by the falling costs of lithium-ion batteries. BloombergNEF predicts that costs per kilowatt-hour will halve by 2030, having already tumbled by 85 percent since 2010.

It’s worth keeping in mind, however, that the rapid growth of battery storage systems will create new headaches for future generations to deal with.

If spent batteries are improperly disposed of, the effects can be damaging for both health and the environment. The EU has already passed a recycling directive, but the US – the industry-leader in storage investment – is lagging.