Lower costs, technology and regulations will strengthen storage's appeal, Aquila said (Credit: Byron Stafford / NREL)
A new poll has identified energy storage as the most promising technology for institutional investors keen on renewable assets, amid plans by many to ramp up allocations.
Nearly two-thirds of all asset owners and managers quizzed by the firm chose batteries and other energy storage technologies as the renewables subsector with the greatest potential.
The appeal of storage rests on the "growing role" it will play in the European energy mix as renewables become more prominent, Aquila said as it released the findings. "Cost reductions, technology development and improving regulations will continue to strengthen the investment case for storage moving forward," the firm added.
The respondents – a 103-strong base featuring pension funds – dedicated on average 3.6% of their portfolio in 2018 to renewable infrastructure, a rise from the 2% recorded in 2016. For 12% of these investors, the exposure last year reached into the 10-15% region.
According to the survey, the institutional appetite for renewables looks set to build all the way to 2021, with 49% poised to ramp up exposure by that year. Despite their optimism around storage, the polled financiers planned their largest allocation increases in offshore wind, solar thermal and onshore wind.
Regardless of their investment target of choice, institutional players were drawn to renewables as a whole by long-term cash flows (the top reason for 55% of respondents). Geographic diversification, low correlation to other asset classes, inflation hedging and ethical considerations were, in descending order, the other key drivers.
Energy storage aside, electricity transmission was seen as the second most promising investment area, with interconnector projects close behind. Allocations in these two areas could be key for a solar industry faced with grid challenges in certain markets and question marks over interconnection projects, with the UK particularly exposed if no-deal Brexit comes to pass.
The survey’s findings contrast with those of other recent polls of institutional investors. Last week, the Octopus Group revealed grid-scale solar power was the top deployment choice for the 100 financiers it had sounded out in recent months.
May 26 - May 27, 2021
Looking at the drivers and dynamics of utility scale solar in the UK & Ireland over the next five years. This event will consider the immediate challenges as we enter the build phase in both these markets where we could see as much as 4GW deployed in 2021 alone! What developments will continue the growth of 100MW+ sites and what impact will government policy have on the rate of deployment in both markets?Join leading developers and manufacturers shaping the direction of one of Europe’s most active markets and hear from speakers with a history of influencing innovation and change.
Feb 23 - Mar 03, 2021
The Energy Storage Summit plays a pivotal role in the journey to propelling the industry into the next stage of its development, providing an unrivalled platform to develop the right partnerships and create business opportunities of all sizes. This eco-system event brings together the entire value chain including Utilities, Developers, EPCs, Investors, Manufacturers, Energy storage providers, local government and DNO’s making this the must–attend storage event for 2021. Not just virtual, but you will get 4 days of content over the course of 2 weeks.
Feb 03 - Feb 04, 2021
The business of solar is changing, as the industry scales up, technology, IT and new players to the market will add complexity. This sparks a host of opportunities such as co-location of solar and storage and the rise of unsubsidised solar projects as well as challenges which will question the very business model of European solar asset owners. Solar Finance & Investment Europe is the meeting place for institutional investors, sovereign wealth funds, solar, wind and storage funds and large energy buyers to do business.