BVES Investor Summit: “Making money with BESS is easier than ever”

Infrastructure investors are used to stable revenues, but for BESS, high volatility means high upside, and there is still work to be done on reconciling the two.

The good news is that financiers are increasingly interested in backing BESS. However, with batteries still a relatively new asset class and often hindered by complex regulatory frameworks, non-recourse financing is not easy to access. Building a credit solution for such an asset class is challenging due to the nature of the BESS revenue stack — it becomes almost impossible to predict how it will look five years from now.

These were some of the key talking points at the 2nd German Federal Association of Energy Storage Systems (BVES) Investor Summit held in Berlin on Wednesday. The event brought together more than 300 international investors, banks, funds, and insurers, who discussed the opportunities and challenges of investing in storage technologies with industry and market representatives.

“A few years ago, the financial sector had to get used to these new players in the energy system and in their investment portfolios. Today, we see widespread recognition and enormous interest in this market. Private capital is helping to push the energy transition forward without subsidies,” said Urban Windelen, executive director of BVES.

Windelen also highlighted the importance of legal certainty for investment security and appealed to the next federal government in Germany to “allow industry and business to pursue their own paths to decarbonization and create space for private capital and investment to shape our future energy system jointly.”

While the market for energy storage is growing by leaps and bounds, Maria Leis from Breakthrough Energy stressed that we are not yet on track for scaling up storage solutions. To bridge this gap, financial vehicles must make these capital-intensive investments appealing to the finance industry. Flexible solutions are essential, with a mix of short- and long-duration storage technologies needed to meet diverse market demands.

Casimir Lorenz of Aurora Energy Research pointed out that the business case for batteries is constantly evolving due to cannibalization in ancillary markets and regulatory changes in the capacity markets, with the latter being the most common contractable revenue stream across Europe. Therefore, building a solid business case is critical to scaling up energy storage, Lorenz said.

Christian Bauer and Britta Wissmann from law firm Watson Farley & Williams talked about large-scale storage as an illiquid yet vital infrastructure asset. They suggested that the problem of grid connection in Germany could be addressed by flexible grid connection agreements and cable pooling, while further flexibilization of ESS for full participation in the electricity market would remove regulatory bottlenecks faced by systems that charge partly on renewable energy and party from the grid.

Many speakers have highlighted the rapidly falling investment costs due to a nearly 40% drop in BESS costs over the last 12 months. However, Ralf Bucher of H&MV Engineering said that the cost of early contract works is not going down although project sizes and durations are growing. Electrical engineering work is nearly the same for big or small projects, he noted, adding that there is a tendency among grid operators toward higher voltage levels — up to 380 kV, longer distances from HV grid access point to site, and obligation for underground cables (110 kV).

Lars Stephen of Fluence cast a look across various European battery markets, highlighting their different revenue potentials. He noted that making money with BESS is easier than ever but that the individual investment profile will define exposure to volatility as compared to a medium but guaranteed income.

To unlock this potential, AI-driven optimization platforms are needed as tapping into various revenue streams requires much faster decision-making than humans are capable of. Steffen Schülzchen, CEO of Entrix, said that more than 350 contracts are made in different markets every day to achieve the best outcomes, with 95% of the trades happening virtually without degrading the battery. Lennard Wilkening of suena outlined varying price models for storage and renewables in power trading, with tolling agreements entailing the highest contracted revenues and, thereby, the lowest exposure to volatility that BESS can best capitalize on.