With lithium-ion batteries raising ESG-related concerns, investors are increasingly seeing value in long-duration storage
Europe braced for €11.9bn storage 'revolution'
Investing in energy storage can be a risky business.
This is particularly the case when you consider that the way in which energy storage systems generate revenue can differ from market to market.
For example, in some markets, there are financial rewards when storage systems charge as well as discharge. In other markets, storage systems only generate returns when they discharge.
Anything that can be done to unite such disparate markets can only be good in terms of attracting more investment into the battery storage sector.
This is what the European Commission has sought to do by recently approving €2.9bn of public support by 12 member states for a second pan-European research and innovation project that covers the entire battery value chain.
The funding is taking the form of a what is termed an ‘Important Project of Common European Interest’ (IPCEI). But what will the funding be spent on?
‘Risks are too big’
The aim, according to the European Commission, is to “contribute to the development of a whole set of new technological breakthroughs, including different cell chemistries and novel production processes, and other innovations in the battery value chain”.
The IPCEI – which is intended to complement an earlier battery value chain IPCEI approved in December 2019 – will cover the entire battery value chain from extraction of raw materials, design and manufacturing of battery cells and packs, to recycling and disposal in a circular economy, with a “strong focus on sustainability”.
The project is entitled ‘European Battery Innovation’ and was jointly prepared and notified by Austria, Belgium, Croatia, Finland, France, Germany, Greece, Italy, Poland, Slovakia, Spain and Sweden.
The European Commission has stressed the importance of different battery storage markets working together in order to make technological advances.
This point was not lost on the commission’s executive vice-president Margrethe Vestager, who is in charge of competition policy. She has acknowledged that the risks when investing in battery storage can be so great that it can deter member states from taking a punt on such technology.
“The risks can be too big for just one Member State or one company to take alone,” she said.
€1bn for Tesla?
It’s also crucial to point out that the investment ploughed into the industry should end up being significantly more than the €2.9bn headline figure. The commission has said that the expectation is that the public funding will unlock an additional €9bn in private investments.
This is more than three times the level of the public investment and means battery storage innovation projects in Europe could benefit to the tune of €11.9bn. The commission has also sought to clarify that the project is “’in line with EU state aid rules”.
Big name beneficiaries of the funding include Tesla and BMW. Indeed, reports have suggested that Tesla could receive at least €1bn from the German government under the scheme.
In total, there will be 42 businesses that directly participate in the programme.
Again, the idea of cooperation between players in different markets – in addition to multidisciplinary cooperation – is key. The commission says the direct participants will “closely cooperate with each other” with around 300 collaborations envisaged, with the involvement of more than 150 external partners, including universities, research organisations and SMEs across Europe.
Revolutionising the market
The project is ambitious in scope, but how successful will it be?
Francesco Venturini, CEO of Enel X, which has been given the go-ahead to develop three Italian projects under the scheme, could have the effect of revolutionising Italy’s economic model and help meet the objectives of the European Green Deal, the set of policy initiatives that aims to make Europe climate neutral by 2050.
Venturini said the projects would make a contribution to “improving the sustainability and efficiency of storage systems and their integration into the power grid, [and] encouraging a circular economy model that is in keeping with the aims of the Green Deal”.
This project clearly has significant potential. And the fact that European nations will be working collaboratively will dramatically boost its chances of success.
European Commission vice-president Maros Sefcovic, who is in charge of the commission’s European Battery Alliance, is especially bullish.
“This strong pan-European project will help revolutionise the battery market,” he said. “By 2025, our actions under the European Battery Alliance will result in an industry robust to power at least six million electric cars each year. Our success lies in collaboration.”
The project is still in its infancy so we cannot yet judge on results. But the injection of nearly €3bn of public funding into energy storage innovation will give investors confidence that they will be able to inject funding into projects that now have a much lower risk-profile than they had in the past.