Energy storage now facing 4 major PR challenges
Institutional investors have begun backing storage in a big way, but increased investment is bringing more scrutiny for which many energy storage businesses will be unprepared
- As more investors enter storage market, companies are under growing scrutiny
- Storage sector now facing public relations challenges as business models questioned
- Financial viability, product quality & ESG credentials being probed
There seems to be little doubt that energy storage deployment is set to increase dramatically in the coming years. Data from Statista suggests that the value of the global battery storage market will more than triple in the next five years, soaring from $5.4 billion currently to $17.5 billion in 2028.
But such bullish predictions may be failing to take into account imminent public relations challenges that the energy storage industry will have to face, in the short-term at least. For many years, the energy storage industry has had an extremely low profile. It is only in the last two years that worldwide energy storage deployment has started to accelerate substantially. Two years ago, global cumulative energy storage installations stood at around 25GW, according to BloombergNEF – in contrast, two years from now, global cumulative energy storage installations are expected to reach almost 150GW, a six-fold increase (see chart). In short, a much broader range of investors are now starting to take energy storage seriously. Institutional investors had initially been sceptical about the renewables sector – an analysis conducted in 2020 showed that despite accounting for $87 trillion in assets under management, institutional investors had, up to then, played a minor role in financing renewables.
But times are changing. Some market observers have highlighted Goldman Sachs’ $250 million investment in compressed air energy storage company Hydrostor in January 2022 as a turning point. But there had been earlier instances of institutional investors making forays into storage - Blackstone Infrastructure Partners made its first investment in energy generation and storage developer Invenergy back in 2021 and subsequent cash injections mean that the alternative asset manager has now pumped $4 billion into the company, with the most recent $1 billion tranche dropping in June this year. Suddenly institutional investors are backing energy storage companies with hard cash.
However, as larger investors begin backing energy storage, so the scrutiny placed on the sector and the businesses that operate in it is also increasing. For example, analysts are now taking a much closer look at energy storage companies’ financials. Only last week, one high profile energy storage company was accused of having a “fake” backlog, which was being used to “relentlessly” pump its stock. The company was also dismissed as having “abysmal financials” and of having signed contracts with financially dubious companies.
'Dumb ideas' and 'failed technology'
Another public relations challenge energy storage companies are increasingly facing, particularly those at an early stage of development, is convincing potential investors that their technology actually works. One energy storage company – which has a market cap that is measured in the hundreds of millions – has been accused of selling a “failed technology”, while YouTubers have posted videos claiming certain forms of gravity energy storage offered by some companies are a “dumb idea” and urge potential investors not to “fall for it”. Searches on YouTube also unearth videos in which leading energy storage companies are accused of marketing products that are “incredibly stupid” and not feasible.
It's clear that in the increasingly competitive energy storage market, technology providers are starting to fight dirty. Rumours of supposedly ‘independent’ market observers seeking to discredit certain types of energy storage technology while secretly being on the payroll of market players with ‘skin in the game’ may be wide of the mark, but it’s clear that as the battle for energy storage market domination intensifies, it’s more important than ever that energy storage companies do as much as possible to manage their public image.
And this is before we get into the issue of public concern about fire risk. A number of proposed battery storage projects have been cancelled due to local communities’ concerns about fire-related risks, including worries about toxins being released into the air. If that wasn’t enough, manufacturers of lithium-ion batteries are also having to deal with increased scrutiny regarding how and where they source lithium. For example, earlier this year, it was reported that lithium-ore processing operations in Yichun, in China’s Jiangxi province, had been shut down due to a government investigation into infringements of environmental laws, including alleged incidents of pollution.
With energy storage companies under the microscope, here we highlight the four biggest public relations challenges they face:
1. Are investors & potential customers convinced your technology actually works?
There has been considerable scepticism about some of the energy storage technology on offer in the market. Criticism ranges from talk of batteries not being an effective way of storing wind and solar energy, to claims that some types of gravity storage would not operate efficiently in certain environments. Other brickbats that have been thrown include suggestions that alternatives to lithium-ion batteries have lower round trip efficiency and that, as a consequence, widespread uptake of such rival technologies is unlikely.
2. Is your energy storage business financially sound?
Many energy storage companies are highly innovative start-ups that are desperate for financial backing, but the fact that Swedish long duration energy storage company Azelio recently decided to file for bankruptcy will have spooked some energy storage investors. On 2 May this year, Azelio announced it had entered into a conditional loan agreement “corresponding to SEK 30 million (€2.6 million) from the company’s major shareholder, which ensures the company's short-term liquidity.” However, in July the company admitted that it had not been able to secure sufficient financing to be able to operate the business. Meanwhile, last week, US-based Eos Energy Enterprises was forced into issuing a statement in an attempt to reassure investors that customers representing a significant proportion of its backlog are financially sound companies following allegations that Eos Energy had large contracts with companies that were unlikely to honour their obligations.
3. Do your energy storage projects pose fire risks?
A number of battery storage projects have been postponed after local communities aired concerns about possible fire risks. For example, in April this year, local residents in Maryland’s Prince George’s County in the US launched a campaign against a proposed lithium-ion battery storage system near their homes amid fears of possible fires and explosions. Elsewhere, in the New York borough of Staten Island, developers were forced to withdraw plans for a 120MWh battery storage system after local community fears about fire and possible exposure to toxic chemicals.
4. Is your business ESG-compliant?
China is responsible for 77 per cent of the world’s battery manufacturing, but if your company is sourcing batteries from China this will cause concern among your potential investors, and alarm bells will be ringing when investors weigh up your business’ ESG [environmental, social and governance] credentials. In the context of lithium-ion battery manufacturing, China scores alarmingly poorly from an ESG perspective. As Greenly has highlighted, investors are increasingly interested in ESG criteria for evaluating businesses because higher ESG performance “correlates with higher returns, lower risk, and long-term business sustainability”.