'Capital Unlocks Capacity': The Latest Energy Storage Trends
A new report from global law firm DLA Piper has charted how investors are reshaping their approach to battery energy storage systems (BESS), the technology used to store electricity from the grid or from renewable generation for use when demand requires it.
The Capital Unlocks Capacity report draws on a survey of 550 respondents across 11 markets, with respondents including private equity investors, institutional investors, commercial banks, developers and independent power producers.
The headline finding is straightforward enough. The US remains the most attractive market for storage investment, cited by 25% of respondents.
The UK follows in second place on 19%, ahead of China on 14%, while Germany, Canada and Australia each scored 11%.
The more revealing story, however, is found beneath those numbers.
Rules over resources
The report shows that investors are not simply chasing the biggest markets or the greatest theoretical need for storage.
Instead, they appear to be investing in regions that can offer the most predictable rules, viable grid access and established revenue models.
The findings show that the top priority for investors considering a new project is the strength of the area’s supply chain and the stability of its regulatory environment.
This, in part, explains the UK's strong showing despite its comparatively small pipeline.
“Investors are finding countries such as the UK appealing because they provide consistent market rules and viable returns,” the report says.
Grid access remains a persistent constraint, particularly in the US, where rapid data centre growth has overwhelmed interconnection queues.
Steve Miller, Chief Investment Officer at Clearway Energy, said "interconnection is now a gating item for development success, not an afterthought".
Risks, rewards and sure bets
The report also tracks a shift in appetite for merchant revenue risk, meaning income exposed to fluctuating wholesale prices rather than fixed contracts.
Lenders were historically reluctant to underwrite this exposure.
Now 44% of respondents are comfortable with merchant exposure of between 21% and 40%, with a further 34% open to 41% to 60%.
That said, underlying return expectations remain fairly modest.
Half of investors surveyed are seeking an internal rate of return of just 11% to 12%. Only 3% are chasing returns above 15%, which speaks to a market that is still wary of staking risk for reward.
DLA Piper also finds that capital is moving away from speculative early-stage bets.
Around 43% of respondents say they are most interested in ready-to-build or late-stage projects, against 28% targeting greenfield schemes.
No respondent expressed interest in distressed assets, which the report frames as a sign of underlying market strength. It might equally be read as a market not yet tested by genuine financial stress.
Germany, the UK and China stand apart, where early-stage projects remain more popular than elsewhere.
Long duration lags behind ambition
Long-duration energy storage, broadly defined as systems capable of discharging for eight hours or more, is gaining strategic traction.
Nearly two thirds of respondents are active in or committed to the technology.
But enthusiasm varies sharply from market to market. France, Canada and China cite it as a core priority far more often than Germany or the UK.
In the UK just 17% view it as core to their strategy, despite a government cap-and-floor mechanism designed to underpin such projects.
That gap between policy support and investor appetite raises questions over how quickly the scheme will translate into deployed capacity.
Natasha Luther-Jones, Partner and Global Chair of Energy and Natural Resources at DLA Piper, sums up the broader shift.
"The capital is there but is being distributed in a much more disciplined way than before," she says.
Whether that discipline holds as competition for "Goldilocks" projects intensifies, or whether it simply pushes more capital to the sidelines, will be the question to watch over the next investment cycle.