Investment appetite for battery storage set to grow in 2023

LONDON (ICIS)–Investors interest in funding development of new battery storage projects across the European Union and the UK is set to grow in 2023, market sources told ICIS.

“This year inflation is losing traction as renewable projects are adapting to the new environment and moving ahead,” Ro Lazarovitch, partner at law firm Bracewell said during a roundtable energy discussion on 31 January.

The European Commission President Ursula von der Leyen revealed on 26 January plans for EU’s own Inflation Reduction Act (IRA)-style package – similar to the one recently implemented in the US – called the Green Deal Industrial Plan, for clean energy technologies including battery energy storage.

“The Green Deal Industrial Plan is our plan for Europe to secure our place as the home of industrial innovation and clean tech and covers four key pillars: regulatory environment, financing, skills, and trade,” said von der Leyen.

“Europe needs a real and very ambitious energy storage strategy that directly encourages investors and producers throughout the supply chain, from primary material extraction to recycling,” Julian Popov, a member of the advisory council at EU’s largest public-private partnership Climate-KIC and European Council on Foreign Relations told ICIS.

“In the context of the IRA, we must finally support the most successful and proven innovative enterprises to increase the competitiveness of the EU. At the same time, it is extremely necessary to work closely with American companies, to build partnerships, and not to raise protectionist barriers,” he added.

BATTERY STORAGE PUSH

Alongside funding new renewable capacity, battery storage plants will be key for EU’s energy transition, sources said.

“We are not seeing significant abandonment of renewable projects as renewable market is adapting to the inflation environment, although the execution of some projects is being delayed,” added Lazarovitch.

Funding appetite for battery storage is growing given various supporting schemes across EU, added one investor.

“Tenor and debt financing for battery storage projects really varies significantly between projects and regions,” explained Lazarovitch.

Variables such as size, route-to-market, debt-to-equity, jurisdiction, will all play a part, he said.

“A standalone, medium-sized battery storage project with floor pricing will attract a very different debt package to, for example, financing a portfolio of storage projects with low leverage and merchant pricing,” the Bracewell partner told ICIS.

Popov added that the EU should not disrupt or profoundly transform the market, but use it to advance energy storage.
“During the acute energy crisis that has now passed, the market has shown that it works. This simple fact should also apply to batteries and other forms of energy storage,” he said.

“One of the risks we face is a solar energy boom that will cannibalize its own success. We therefore need to encourage the rapid deployment of batteries and hydrogen production to form a more balanced renewable energy market model,” Popov concluded.

CEE DEVELOPMENTS

The financing market is still evolving, especially in the CEE, stressed Lazarovitch.

Last year Bracewell’s deal in Greece was one of the largest in southeast Europe for battery project.

Renewable developer Fotowatio Renewable Ventures acquired from Greek developer Wootis a majority stake in a 600MW battery storage project, the largest commercial operation in the field of power storage with battery systems in Greece, said an official release on 7 November.