COP26 established that momentum has shifted. Net zero commitments have become the standard, but the demand for solutions and systems to meet them appears to have surpassed the supply. However, the most significant lever we can pull today is right in front of us.
Since the UN climate conference, the 54% increase to the energy price cap in April and the spike in fuel prices in the wake of the tragic situation in Ukraine has escalated the importance of energy self-sufficiency. The obvious solution is the continued deployment of Renewable Energy Systems (RES). Yet we need a bigger toolkit than just renewables.
Renewable Energy Systems form a critical source of energy, but it’s the rapidly developing Battery Energy Storage System (BESS) sector that offers a real opportunity for strong and stable long-term returns. This is why the technology has been described as one of the most significant areas of investment in the energy transition story.
Renewables and battery storage have a symbiotic relationship. While renewables play a key part in the transition to net zero, they are limited by intermittency and curtailment – sometimes the wind doesn’t blow and the sun doesn’t shine. This can create volatility and instability within the UK grid. It matters because low carbon sources accounted for 21.5% of the UK energy supply in 2020 and that will grow significantly over the next decade.
But amid all the talk about renewables and clever ways to cut carbon emissions, the issue of energy wastage within the distribution infrastructure – before it even reaches its end-users – tends to be overlooked. This is where BESS technology plays an important part.
Around 54%, or about £9.5bn, is lost in the UK electricity system from the conversion, transmission, and distribution of energy before it reaches homes and businesses. It’s a fact that goes largely unnoticed. In 2020, 3.6 TWh of wind power was curtailed – enough to power one million homes for a year. This shouldn’t be the case – the technology for a solution is already available.
Enabling a more efficient energy system
BESS technology can play crucial in enabling a more efficient energy system and help to resolve some of limitations of Renewable Energy Systems. It’s an area of focus for Triple Point Energy Efficiency Infrastructure Company (“TEEC”), an investment trust which invests exclusively in a diversified portfolio of Energy Efficiency assets in the UK. TEEC recognises that there has been a vital rollout of clean energy generation from solar and wind sources, but insufficient capital has gone into storage of the energy generated.
The reality is that the deployment of such batteries to date is not consistent with the existing deployment of renewable energy generation. BESS technology will therefore need to grow to significantly to catch up.
By the end of 2021, the UK was forecast to have total installed capacity of 1.3GW of BESS in the UK. This is expected to double by 2027 and double again by 2035, according to independent research.
TEEC channels funds into the entire UK energy system, covering generation, distribution, and consumption. For investors, BESS offers a variety of revenue streams and a strong stable long-term outlook. Typically, battery projects can provide returns in excess of 9%, with recent performance suggesting a robust equity investment case. Against a backdrop of market uncertainty and inflation at 5.5%, battery energy storage presents an attractive investment.