Potential profitability of battery storage in the UK

9 November 2018 – Proactive Investors

“Investors have yet to grasp how profitable battery storage in the UK might become”

Investors don’t realise the scale of the opportunity in power storage, argues Ben Guest, the manager of Gresham House Energy Storage Fund PLC (LON:GRID).

There is a huge boom underway in wind power and while that is helping decarbonise the economy, it makes balancing supply and demand on the UK National Grid much more difficult.

Batteries are one answer, he says.
They can store excess power in the system, which removes a cost from National Grid and makes a profit for the storage groups.

“It’s an enormous market in the making,” he tells Proactive.

Indeed, Guest believes investors have yet to grasp how profitable battery storage in the UK might become.
“We have so much wind around our island and that creates intermittency and choppiness in power supply.”
Due to this intermittency, batteries are the most profitable form of ‘generation’.

“We are classified as generators by the regulators,” he says.

“So we can generate energy at a zero or negative price and sell it at the same high prices as anybody else.”
At present, UK battery capacity is 350Mw, but Guest can see this figure growing by 50-100 times over the next 10- 15 years as more than 2,000Mw of renewable generating capacity comes on stream.

£100mln raise

Gresham House Energy has just raised £100mln through an IPO, which was helped by the promise of a healthy yield.

Guest though believes the trust appeals equally to socially responsible investors (SRI), income funds and even growth seekers.

The dividend will be 4.5p in the first year and rise to 7p in year two and grow in the years thereafter.

Gresham Energy has a target return on a NAV basis of 8.0% a year and will leverage up to 50% to boost the returns.

Of the £100mln raised, £57.7mln will be spent immediately on a 70Mw seed portfolio, while the company has exclusivity over an additional 182MW read- to-build projects.

“I think one of the exciting things here is we are uncorrelated to the broader economy because it’s very much a secular shift within the power markets.

“We are also uncorrelated to power prices because, just so long as there is a spread.”

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