Today the UK has around 5.6GW of short duration energy storage capacity. Government’s Clean Power 2030 Action Plan highlights the need for a further 20GWi of new battery energy storage systems (BESS) to be delivered in the next five years to help provide a secure supply of renewable energy and ultimately reduce curtailment costs.
Meeting these ambitious targets will require an estimated £10bn of investmentii. With the sector still at a relatively early stage of maturity in terms of scale, it’s not unusual to find commercial investors held back – perhaps understandably - by their risk appetite. For those investors that aren’t deterred, a market capacity issue remains due to the sheer size of investment required in a short space of time.
That’s where the NWF can play a significant role. We can support experienced developers who have an actionable pipeline, but who have been held back by capital availability. And our track record shows that our presence as an investor attracts additional private capital into the sector.
We announced our first investment in battery storage in May 2023, with a £62.5m debt commitment to Pulse Clean Energy. At the time, portfolio level debt in battery storage was still emerging, and our involvement aimed to help solve that problem.
Just last month, Pulse Clean Energy announced a successful fundraising backed entirely by private investors, and our loan was repaid. This wasn’t only a major milestone for Pulse Clean Energy, but also for the NWF. We step away with the confidence that our involvement has successfully mobilised private debt finance into the sector, opening up new pools of capital for battery storage developers and operators.
But the problem is far from solved, just as our role in the sector is far from over. We were set up to be agile in our interventions, to adapt to market needs, and this means we have been able to change our focus from debt to equity in direct response to demand.
Our announcement today of a £200m equity commitment into the Fidra Energy platform, alongside EIG, will, for example, help finance the first of their battery storage projects - Thorpe Marsh in Doncaster, which is set to be the largest battery storage site in the UK. Building on our recent investment in Eelpower Energy, we are backing the expansion of this sector in the UK at scale, bringing in private capital support every step of the way.
Despite some recent commentary to the contrary, our experience over the past few years tells us that our equity is very much needed in the sector.
There are over 50 BESS platforms and developers currently active in the UK and only a handful of these have the equity funding to construct projects at sufficient scale and pace. Interest rate rises, volatile energy prices, supply chain challenges and grid connection delays have left market players unwilling to offer the scale of investment required. Many have had negative experiences and therefore restricted new capital approvals, or sought to exit or de-risk their positions. When you consider the sheer size of investment required over the next six years, it’s vital to ensure progress isn’t held up by lack of investment. We have the right risk appetite to support this sector, our pipeline is busy, and we stand ready to invest now in projects which align with our mandate.
And importantly, with each equity investment, we look to bring in additional capital from the private sector. Our investment principles make crowding in private finance at a sectoral level an essential part of our approach. Our recent equity investment in Eelpower Energy was made alongside Equitix and Australian super annuation fund, Aware Super, with the latter openly saying they wouldn’t have taken part in the transaction without us. We can, and we are, bringing international investors into the UK.
It’s encouraging to see the shift in debt finance in this sector over the last couple of years to a point where we aren’t currently needed in that respect. If and when there is the same shift in equity, we’ll adapt and refine our focus to crowd private finance into other sectors that need it. In the meantime, we’re proud to play a role in helping our clients progress as they develop and deliver innovative energy storage solutions which will benefit the length and breadth of the UK.
If you are looking for support, please contact us.
i CP2030 action plan was 23-27GW as a target. we're at c.5.6GW today which leaves a further requirement of between 17.4GW - 24.4GW
ii Estimate based on 20GW required storage capacity, where each MW is estimated to cost between £400K to £700K.
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