Author: Jason Deign, Solarplaza
Storage start-up investments by European utilities respond to a growing need for electricity firms to take the lead in energy market transformation, according to experts.
“The current business models are broken,” said Gerard Reid, founder and managing partner of corporate advisory and financing firm Alexa Capital. “Batteries are providing one of the major innovations in and around the power sector, and [the utilities] have to understand it.”
Germany’s two largest electricity companies, RWE and E.ON, have both made recent investments in energy storage firms. Last August RWE Supply & Trading pumped USD$30 million into Stem, a US startup specialising in behind-the-meter storage.
Then, in December, E.ON became a strategic investor in Greensmith, a US leader in energy storage software. E.ON is planning to soft-launch a new PV-plus-storage offering for the German market in April, the company has confirmed.
The investments “will help to transfer knowledge and potentially be profitable for the investment arms” of the utilities, said Asif Rafique, managing director for energy storage at SUSI Partners, a Swiss renewable investment advisory firm.
At the same time, though, he said: “The operational divisions are thinking about [energy storage] now. They are rolling out their own programmes, or at least they already know what they want to do. It’s very much on their agenda.”
E.ON’s vice president of battery systems, Eliano Russo, confirmed the utility was keen to embrace storage for operational reasons. “We expect renewable energy capacity to triple in the next 15 years,” he told Solarplaza.
“We already see the impact of this in Germany and California, and see the need for more flexibility in the system.”
Rafique said energy storage was increasingly being seen as valuable addition to the utility asset base.
“With improvements in efficiency and reduction in costs it is potentially possible for batteries to offer frequency response services at levels close to where traditional plants are priced at,” he said. “But [batteries are] much cleaner and better at it.”
Utilities would also not be immune to the current interest surrounding batteries, he said, or the fact that energy storage startups are keen to woo utility shareholders.
Start-ups “are looking to have a strategic [investor] like that in their shareholder base,” he commented. “That’s why they are attracting these counterparties.”
Utilities, meanwhile, “have been through a very bear market. They’ve realised they have to change and are looking around for new business models.”
Furthermore, said Rafique: “There are also new operational trends: you lose a degree of stability in the system and storage offers a good solution to that.”
Reid foresees growing utility interest in energy storage, initially focused on the provision of frequency response services. “That’s 3 or 4 GW across Europe,” he said. “They’ll dominate that market.”
And the electricity firms are unlikely to stop there, he said. “We’re at the infancy of this technology,” he noted. “Depending on where you put storage, you could have over 10 different revenue streams.”