Increasingly, energy storage projects are being seen by investors as promising. Though there is a high demand for such projects from an investment standpoint, investors look at certain factors to decide if a project — or partnership — is worthy.
For such investor/project owner partnerships to be successful, energy storage projects should be broken down into digestible pieces, giving investors and project owners an overview on what to discuss when considering a partnership.
According to energy-storage.news, the right equation for a first discussion between developers and investors is the following:
Project Stage + Technology Type + Usage Mode = Business Case under consideration
Information investors seek
The site also goes on to note that there are three important pieces of information investors seek when looking to partner with an energy storage project.
- Project Stage:
At first, it is of utmost importance for every investor to know the current stage of the project. Is it an R&D Technology project, implying more risk and returns in the long-run or is it rather a commercial storage unit, relating to lower IRR expectations but real cash-flows in the near term?
- Technology Type:
Giving investors a brief but meaningful overview in the considered technology as well as the current status. One example would be the maturity of the technology in a pumped hydro storage plant, compared with the relative immaturity of fuel cells. A menaingful overview leads to a better understanding on technology risk, implied cost expectations (CAPEX requirement) as well as easiness of project realisation.
- Usage Mode
As there are a lot of different usage modes of energy storage units, varying from providing black-start capacity and frequency regulation to electric time shift (aka solar load shifting) or electric supply reserve capacity, the underlying economics and business models can vary heavily. Providing the investor with the planned mode of usage and indicating on how and by whom the power is fed into the generation unit, as well as information on who is the off-taker of the electricity speeds up the understanding of the business case and allows to briefly validate the business model upfront, thus avoiding long discussions and clarifications.
Sustainability and investors
Investors are interested in more than just energy storage projects, however. Sustainability plays an important role in attracting funding.
In fact, nearly all (95%) of respondents from a recent study say they plan to engage with companies they invest in about issues related to the Sustainable Development Goals (SDGs), according to an S&P Global report. Investors say their assessment of a company’s environmental, social and governance (ESG) profiles have evolved from a simple measure of corporate responsibility to a key driver of an investor’s decision-making. So the standardization of an ESG framework – which the market currently lacks – is a critical part of an increasingly values-based economy, the report finds.
This topic – investor interest in the ESG practices of the companies they evaluate – has risen to the forefront in recent months. In fact, two reports released last month focused on the topic, with similar findings: companies that don’t address risk in their environmental reporting may be missing out on an opportunity to build investor trust and ensure long-term profitability. Companies that acknowledge risks and analyze how those risks might affect their value may be more likely to catch the eye of investors, according to a report from Ceres.