- Storage seen as sound investment by oil sector, while also boosting green credentials
- However, doubts persist about which technologies will be most successful
- Some investments from oil majors have come with reputational risks
Many of the world’s biggest oil companies have been making investments in the energy storage sector in recent years. This has been partly due to oil majors’ desire to bolster their environmental credentials, but also due to business considerations – oil executives know that energy storage will be a booming industry in the coming years and therefore pumping capital into the sector represents a sound investment.
The highly developed US, UK and Australian storage markets have proved to be particularly appealing to oil industry investors, and long-duration storage projects have proved to be attractive. However, it seems that some oil companies, at least, are not yet convinced as to which type of storage technology will be the most successful in the future and there has been an interest in backing early-stage pilot projects with a view to demonstrating their commercial potential.
Meanwhile, though some oil majors have sought to invest in energy storage developers, others have decided that their best bet is to back battery manufacturers.
However, forging links with some oil companies has proved controversial, so much so in fact that, as we will see, one storage business was recently forced to play down its links to one of its oil industry backers.
Shell: Backing Australian storage
In one of the most recent examples of an oil company investing in the storage sector, it was announced this week that Shell had awarded AUD$560,000 in funding to Australian storage company MGA Thermal. The award followed a “call for solutions” that sought to identify viable systems for long-duration storage. The funding will be used to accelerate the completion of the MGA Thermal Energy Storage pilot located in Newcastle, Australia. The pilot has a planned storage capacity of 5 MWh, with charging and discharging at up to 500 kW for 10 hours.
It was the latest in a number of recent forays made by Shell into the world of storage. In January this year, it was announced that Australian real estate company Greenspot will partner with Shell Energy on a 500MW/1,000MWh battery energy storage system to be built on the site of the old Wallerawang Power Station near Lithgow in New South Wales. Indeed, the Australian storage market has been a major focus for Shell as it looks to boost its portfolio’s environmental credentials. In October last year, it was confirmed that AMPYR Australia and Shell Energy Australia had signed a joint development agreement for a proposed 500 MW / 1,000 MWh battery energy storage system located in Wellington, Central West New South Wales.
TotalEnergies: Investing in developers and batteries
Elsewhere, TotalEnergies has also been busy adding storage to its portfolio. In April last year, the company announced it would be acquiring Austin, Texas-based Core Solar LLC, which has a portfolio that includes more than 4GW of utility-scale solar and energy storage projects at various stages of development. Then just one month later, TotalEnergies confirmed it would be acquiring a 50 per cent stake in Clearway Energy Group, the fifth largest renewable energy player in the US with a 25 GW pipeline of renewables and storage projects.
TotalEnergies has had a fairly long commitment to the energy storage industry – back in 2016, it acquired a controlling interest in battery manufacturer Saft. In recent months, Saft was a key player in renewable energy developer X-ELIO’s entry into the battery energy storage market. X-ELIO’s first project – located in Chile – consisted of a 58MW solar PV plant and a 5 MWh fully integrated lithium-ion energy storage system, provided by Saft.
Meanwhile, in May 2022, Saft also won a contract from Eiffage Énergie Systèmes to deliver a 10MW energy storage system that will “ensure smooth grid integration” for the 37.5 MWp Boundiali solar photovoltaic power plant in Ivory Coast in Africa. In another deal in March last year, Saft won a turnkey contract for a 6MW / 7MWh lithium-ion energy storage system for the world’s most northerly community of Longyearbyen in Svalbard, the island group in the Norwegian Arctic region.
Chevron: Betting on long-duration storage
Chevron has also been taking steps to invest in long-duration energy storage technology in recent years. In August 2021, it was revealed that Chevron Technology Ventures had invested in Cambridge, Massachusetts-based Malta Inc, a developer of grid-scale long-duration thermal energy storage solutions. Chevron made the investment via its $300 million Future Energy Fund II, which it says focuses on “industrial decarbonisation, emerging mobility, energy decentralisation, and the growing circular carbon economy”. The Malta Inc investment came two months after the same Chevron fund invested in Melbourne-based RayGen Resources, which, Chevron said, was showcasing the “merging of solar power generation with long-duration energy storage”.
BP: Linking storage with solar
What of BP? It was confirmed in October last year that its subsidiary Lightsource BP would aim to deploy 4 GW of battery energy storage as part of its goal of developing 25 GW of solar projects by 2025. Meanwhile, last month, BP said it was planning to build its first solar farm with battery storage on a site in Tiln Farm, Retford, near Sheffield in the UK.
Saudi Aramco: Causing controversy
Saudi Aramco has also been getting in on the act, though with mixed results. In June 2021, it was announced that Saudi Aramco had invested in US gravity-based energy storage company Energy Vault, which began trading on the New York stock exchange last year. Meanwhile, in September 2021, it was confirmed that Californian battery developer Enervenue had raised $100m in a Series A funding round – in which Saudi Aramco was a major investor – to build a gigafactory in the US that would help accelerate the production of its nickel-hydrogen batteries.
However, forging links with Saudi Aramco has been problematic for some storage companies. Back in 2018, US-based Form Energy – which has developed an iron-air ‘reverse rusting’ battery technology - raised $9 million in a Series A funding round that included funding from Saudi Aramco. Last month, it emerged that Form had selected a 55-acre site in the US city of Weirton, near the Ohio River, for a $760 million manufacturing facility for its ‘multi-day’ iron-air battery. It was also revealed that the company would build the facility in partnership with the state of West Virginia.
But the selection of Weirton proved highly controversial. State politicians raised questions about Form Energy’s links with Saudi Aramco, which is a state-owned enterprise of Saudi Arabia. Backed into a corner, Form Energy was forced to come out and say that, while Saudi Aramco had made an initial investment in the company, it did not own any shares in Form Energy. In addition, in response to further questioning, Form Energy said that it did not have any investors that were being influenced by the Chinese government.
Oil investment in storage will escalate, but caution advised
Oil companies’ investment in energy storage companies and projects is only going to escalate. Acquiring stakes now is sure to produce some significant returns if the right investment is chosen. However, it’s clear that storage companies need to be very careful about choosing the businesses they accept investment from as some capital injections will come with substantial reputational risks attached.