As more countries adopt the use of clean energies, disparities between the demand and supply are expected to drive more returns for the funds specializing in battery energy storage systems as well as for battery energy storage systems.
Berenberg analysts expect that the returns of battery energy storage systems for funds such as Gresham House Energy Storage Fund and Gore Street Energy Storage Fund will remain high as a portion of their revenues are associated with power price volatility and they are dependent on the growth of electricity markets. The analysts note that both Gresham House Energy Storage and Gore Street shares trade at a premium to net asset value and both funds have been offering their shareholders significant returns.
Forecasts from the National Grid expect that by 2050 energy requirements in the United Kingdom will have increased to more than 30GW. The cost of batteries is also expected to continue decreasing, having already reduced by almost 90% in the last 10 years. Analysts at Berenberg add that lower capital expenditure requirements will also increase the use of battery energy storage systems.
Last year, the primary source of revenue for the funds was frequency response. However, while revenues are expected to be significant this year, the analysts anticipate that trading will become the primary revenue stream for battery energy storage systems in the short term, which will facilitate more investments in longer-duration batteries.
Gore Street Energy Storage Fund targets a total gross, unlevered internal rate of return of roughly 11% from its project portfolio, with a yearly dividend rate of 7% net asset value. The firm will not be investing in projects under early-stage development except for final delivery and/or construction of battery energy storage systems. On the other hand, Gresham Energy Storage Fund is investing in utility-scale storage systems, with targeted levered/unlevered net asset value total return of 15%/8% net annually, respectively.
The analysts explain that because frequency response is the primary source of revenue for both funds, Gresham House Energy Storage is preferred due to its investor-friendly fee structure and big operational portfolio. Gore Street has access to a wider geography with an extensive pipeline in North America.
They also note that investing in these markets may be a bit difficult given the different market dynamics, adding that they believe there’s opportunity for high future returns as well as significant growth potential in the battery energy storage system in London, as power price volatility continues.
The growing interest of investors in the energy storage segment is likely to draw plenty of attention to battery storage companies such as StorEn Technologies Inc.
NOTE TO INVESTORS: The latest news and updates relating to StorEn Technologies Inc. are available in the company’s newsroom at https://ibn.fm/StorEn
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