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July 19, 2021

Reshaping renewable storage

We look into the innovations and the growing challenges of storing energy produced by renewable sources.

By Yoana Cholteeva

As the energy sector moves increasingly towards green transition, new challenges are emerging. One of the main disadvantages of renewable energy sources – their dependence on potentially inconsistent weather – is thus drawing attention to energy storage systems, which can store and provide power according to demand. 

Growing in popularity along with the increasing demand for more clean energy, this type of distributed generation contributes with a number of benefits such as electrical energy loss reduction in the distribution system, reduction of voltage fluctuations, increasing reliability, power quality improvement, energy cost reduction, and increased customer satisfaction. 

While renewable storage options also come with their unique considerations, among which are protection settings, power system stability, regulation, and financing, the industry is going above and beyond in its efforts to tap into the potential of the quickly expanding field.

The evolution of renewable storage

With the growing importance of storing renewable energy in order to use it more efficiently, energy companies have a  crucial role to play in advancing and navigating the industry, developing new solutions to some relatively new problems.

“We expect the industry leaders to be at the forefront of net-zero carbon and sustainability strategies, with many already adopting green technologies such as solar panels on warehouse roofs, low or zero-emission fleet vehicles, and other energy efficient solutions,” says James Smith, UK managing director of cube-based warehouse automation company AutoStore.

Indeed, any company in the storage solution industry has the opportunity to benefit from solar energy, given the expansive sizes of warehouse roofing. However, more traditional companies will have to face the changing conditions of the market, as many incentives will be put in place to encourage greener options and discourage higher polluters.

“Those companies wanting to operate in urban environments and city centres of the future will need to adopt green energy solutions or be prepared to pay large energy tax premiums linked to emissions, which will likely make them uncompetitive against those businesses that can demonstrate their green credentials,” Smith says.

At this pivotal time, when the energy storage market and the number of storage technologies being developed are growing at a rapid rate, energy storage is becoming central to the development of subsidy-free clean energy projects, which usually ensure zero-carbon electricity at reduced costs for consumers.

Maria Connolly, partner and head of clean energy real estate UK law firm TLT, says: “Developers and investors understand that adding storage capacity onto clean energy generation assets not only helps mitigate against risks such as price fluctuations, cannibalisation, and negative pricing, but ultimately makes these schemes more viable and brings the prospect of additional future revenue streams.”

Getting funding for storage solutions

With few industries witnessing as much innovation as energy storage, investments into battery research have resulted in outstanding developments such as flow battery, molten salt battery, liquid air, and hydrogen solutions, from micro-storage projects to vast storage facilities, co-located with huge clean energy projects.

Interlaced with blossoming innovation on the technological and scientific front, there has been a rise of new, encouraging funding and investment models that have given a boost to the practical deployment of battery technologies and clean energy sources.

“Private equity investors have led the way in funding storage solutions co-located with clean energy projects and, to ensure such projects come to fruition and are a financial success, they have focused on making each co-located asset viable in its own right – this has led to the development of different models capable of monetising storage solutions,” Connolly says.

While such private equity investors have provided the necessary support to start a venture of this kind, traditional debt funders are also getting accustomed to the field as they look to diversify their lending portfolios with clean energy and battery assets. 

“Indeed, last year, a project-finance model came to market that uses a multi-tranche debt structure that matches the tiered risk profile of the revenue model. It is thanks to the development of these new financial models that, over the course of this year, we are likely to see multi-technology schemes, such as subsidy-free solar with energy storage, attract debt financing for the first time,” Connolly says.

As the debt funding of such projects opens the door to new opportunities for clean energy and storage schemes in the medium-term, schemes that stray away from risk, meet project finance requirements, and provide greater flexibility are likely to be favoured by operators trying to secure funding.

However, Connolly advises that developers and investors need to approach such opportunities with caution, keeping a few considerations in mind.

“[They] need to make sure their project rights, authorisations, and contracts are all in order of course, but also that from a legal and planning perspective their projects are adaptable. For example, in terms of permitted import and export capacity to the national grid or whether the addition of further technologies will be possible in the future to create additional revenue streams,” she says.

The changing nature of supply chains

Pushed by the pandemic and exposed by the need of energy companies to update their working process, including supply chains, the industry’s adoption of carbon reducing methods has been approached from various angles.

Smith explains: “Some solutions include the use of micro fulfillment, dark warehouses, and robotic picking. A key attribute of robotic systems is low energy consumption;, for example, 10 AutoStore robots consume less energy than a domestic vacuum cleaner, which makes them highly attractive for warehouses wanting to be as environmentally friendly as possible.

“These systems also require less space due to the density within which they can operate, allowing warehouses to utilise up to four times more space efficiently.”

An example of one innovative solution is Scottish operator Carbon Neutral Energy’s storage system, which recently embarked on a £300m fund-raise in its bid to help prevent emergencies like Texas’ loss of power during a winter storm earlier this year.

Relying on a range of mobile, modular energy storage systems with large capacity battery storage, Carbon Neutral Energy is working to increase green electrification and reduce carbon emissions, helping towards net-zero ambitions.

While the supply chain industry is still heavily reliant on an industrial model, centralised fulfilment, and supply chains, more targeted investment in such solutions could play a big role in reducing travel times and emissions, as well as preparing for efficient delivery by electric autonomous vehicles in the future.

In terms of the pressing need for new legislations and policies that come with the evolving industry, Smith says: “With industry leaders working towards global uniformity in large institutions adopting net-carbon strategies, those companies that have already invested in low-carbon, energy efficient solutions, or plan to invest in those, are most likely to attract the leading financial backers and achieve the most attractive rates, as their businesses will align to the net-zero initiatives.”

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