Why we’re doubling down on battery project development

The Pacific Green group has been focused from the start on diversifying into numerous clean technology segments in the pursuit of rapid, sustainable growth. It is an approach that we feel makes a lot of sense as the world embraces a low-carbon future.

What we are seeing across the energy transition is a series growth opportunities as new low-carbon technologies grow and mature to fill distinct niches within the industrial ecosystem. Solar PV, for example, started out as costly technology with sluggish growth potential.

Now, though, it is one of the cheapest generation technologies on the planet and is being deployed at massive scale worldwide. Looking ahead, we can see green hydrogen—also costly and with only niche appeal today—following a similar trajectory.

We are developing opportunities in these and other cleantech sectors. But there is one area right now that stands head and shoulders above the others in terms of investor interest: battery storage. To see why, let us start by looking at some general market growth figures.

Among the sectors that Pacific Green is targeting, the desalination market is expected to have a not-inconsiderable compound annual growth rate (CAGR) of 7.7% up to 2027.

Batteries are fulfilling an increasingly vital role in stabilizing the frequency and voltage of the grid. This role is highly valued by grid operators, allowing battery plants to make stunning returns without the need for government support.

The exhaust scrubber industry, which was the foundation of Pacific Green’s early success and continues to be an important part of our business today, is growing even more quickly.

The market for power plant scrubbers is forecast to see a CAGR of 7.8% up to 2027 while that for marine emissions control, one of our top business lines, could grow 10.8% by 2025. Within energy markets, meanwhile, PV is slated see a remarkable 20.5% CAGR by 2026.

Battery storage trumps all these markets, however. Market Research Future expects the storage market to see a 25.5% CAGR up to 2027.

This headline figure should be enough on its own to get investors interested, but beyond the market data it is instructive to look at the underlying dynamics of the storage industry.

The International Energy Agency estimates that by 2050 nearly 70% of electricity generation will come from wind and solar power. These are both intermittent energy sources that simply cannot work at scale without storage to even out fluctuations and provide steady grid supplies.

And even with today, batteries are fulfilling an increasingly vital role in stabilizing the frequency and voltage of the grid. This role is highly valued by grid operators, allowing battery plants to make stunning returns without the need for government support.

In fairness, it has taken investors a while to get their heads around the battery market. That’s possibly in part because some of the companies that make battery systems—rather than developing or operating storage plants—have fallen by the wayside.

Also, in the past there may have been a temptation to compare batteries with renewable energy systems such as wind and solar.

But that comparison doesn’t work because batteries don’t produce energy spontaneously and so cannot qualify for feed-in tariffs or benefit from power generation.

In recent years, however, savvy investors have realized that the beauty of energy storage systems is that they do not have to rely on a single source of revenue. Instead, they can tap into several, from improving the value of PV to helping utilities provide electric vehicle charging.

Image
PGT Energy Storage

What is increasingly clear is that batteries could be the smartest investment to help save the planet and investors moving into this space could find themselves surfing a tidal wave of demand. This is being reflected in surging interest in battery system financing worldwide.

The number of funds seeking to invest in storage has mushroomed, with leading infrastructure asset investment players such as BlackRock, Gresham House and Gore Street Capital joining the fray. 

At Pacific Green, we have some of the world’s leading experts on this market and have been careful in choosing our role in the industry.

We are clear, for example, that manufacturing is best left to the large Chinese companies that control the materials supply chain and can command immense economies of scale.

That is why we have a strategic framework supply agreement with China’s Shanghai Electric Gotion New Energy Technology Co.

This is a joint venture between the Chinese multinational power generation and electrical equipment manufacturer Shanghai Electric and Guoxuan High-Tech Co, a global manufacturer that controls almost 13% of the Chinese lithium-ion battery market.

Beyond tapping into Shanghai Electric Gotion New Energy Technology’s manufacturing leadership, we can add value through expertise honed on some of the world’s most innovative battery developments.

Our energy storage team is headed by a former executive from the Shell subsidiary Limejump, which pioneered the use of battery storage for the creation of virtual power plants in the UK.

At Limejump and afterwards, our team has overseen the development of hundreds of megawatts of energy storage.

Pacific Green is committed to leveraging this experience, and our Chinese supply chain, to become one of the world’s leading battery system project developers, creating world-class projects for operation by third parties.

Now is the right moment to be focusing on battery project development. The market is growing so fast that would-be battery operators are desperate for assets. We can offer the development scale that operators and asset owners are looking for.

This focus saw us entering into an agreement to develop a massive 1.1 GW of battery storage capacity with UK-based Tupa Energy in March. Last month, we built on this agreement with the purchase of Sheaf Energy, which operates 249 MW of battery storage in the UK, from Tupa. 

The announcement came shortly after we signed an offer letter for £23 million in debt financing from Close Leasing to fund the development of nearly 100 MW of storage in Kent, England.

Expect more such announcements as we continue to explore further storage market opportunities. Our promise to investors is simple: we can offer one of the fastest and lowest-risk routes to what is likely the most exciting energy infrastructure play today.

We hope you’ll be with us on that journey.