Page 19 - DIY Investor Magazine - Issue 23

‘HIGHLIGHTED THE NEED FOR GREATER INVESTMENT INTO OUR ENERGY INFRASTRUCTURE, IN PARTICULAR INTO BATTERY STORAGE SOLUTIONS’
for electricity is lower in order to deploy it during periods of lower output or when demand is high.
This dynamic underpins the investment opportunity
in energy storage. Our dependence on the National Grid maintaining a continuous supply of energy was thrown into the spotlight in August, when two large generators disconnected from the UK power system almost simultaneously. It effectively withdrew some 1.3 gigawatts (GW) of electricity generation from the grid within minutes, just as the Friday rush hour was getting underway.
Needless to say, the subsequent energy blackout caused chaos for thousands, with stories of commuters held on trains for hours and a hospital left without power. The episode highlighted the need for greater investment into our energy infrastructure, in particular into battery storage solutions which can hold back surplus energy
to be deployed to maintain or boost supply to meet demand.
The growing need for sufficient battery storage offers an interesting opportunity within the broader UK infrastructure sector for investors. Not only can investing in energy infrastructure offer the chance to diversify returns away from those of traditional asset classes, it also provides the chance for investors to support vital projects which will secure future continuity of power supplies to the nation.
There are a number of options available to those interested in the space. Investors can opt to invest directly in companies that own and develop battery storage assets exclusively, of which there are two listed in the UK – Gresham House Energy Storage and Gore Street Energy Storage. These offer direct exposure to the growing demand for battery solutions.
Many existing generators of renewable energy are also beginning to incorporate battery storage solutions into both existing and new projects, so it will likely become
a more significant component of the companies’ asset bases. The Renewable Infrastructure Group is a good example.
A growing number of fund management companies also offer products that invest in the renewable energy space on behalf of their investors. The Gravis Clean Energy fund invests in a portfolio of companies, providing exposure to large projects such as wind farms and battery storage and aims to secure steady returns from them.
Some of the largest and most long-term opportunities are within investment in companies that own operational renewable energy assets, but there is also a growing opportunity set to invest in companies that play a part in the broader theme of ‘cleaner energy’.
There are an increasing number of thematic opportunities to consider including companies operating in the renewable energy supply chain, for example, or those that develop energy efficiency technologies. Wind turbine manufacturers, solar module manufacturers
and developers of carbon neutral properties would all
fit into this category. There are many opportunities in
this growing market, but the Gravis Clean Energy fund’s exposure here is small owing to our focus on income generation and the increased economic sensitivity within this group.
The greater potential for more stable returns are in the operational assets responsible for the generation of renewable energy. Renewable energy projects such as solar parks and wind farms typically benefit from long- term, contracted cash flows often with an element of government-backed subsidy.
19 DIY Investor Magazine | Oct 2019