- $12bn Arevon Energy aims to become leader in energy storage
- New company established in bid to increase efficiency
- CEO warns li-ion batteries may not be best storage solution
With $12bn of assets and a 4.5GW portfolio of solar and battery projects, Arevon Energy is well-placed to make a major impact in energy storage.
The company was unveiled last month as a result of the decision by Capital Dynamics to spin out its US clean energy infrastructure team and merge it with its affiliate Arevon Asset Management.
Arevon Energy will be 100% owned by a group of investors comprising APG, the California State Teachers’ Retirement System, and a subsidiary of the Abu Dhabi Investment Authority. The tie-up is due to conclude by early 2022.
The person charged with steering the ship will be John Breckenridge, who has taken over as the company’s chief executive having previously held the roles of senior managing director and head of clean energy at Capital Dynamics since joining the company in 2014.
So why form Arevon Energy now?
Energy Storage Report spoke to Breckenridge to learn more about the firm's strategy, the growing role of storage in Arevon’s portfolio, and the merits of lithium-ion batteries when compared to other types of storage technologies.
A big factor in the decision to form Arevon Energy was the need to increase efficiency. Breckenridge points out that combining the development expertise of those in the Capital Dynamics US energy infrastructure team with the operational experience of Arevon Asset Management would ultimately mean the two businesses would run in a more economical fashion.
“This industry has evolved to the point where being a vertically-integrated industrial player is really the only way to be successful in the long run,” he says. “I think it’s very difficult for financial investors to continue to succeed without that capability.”
Squeezing value out of “every step of the process” is vital if companies are to develop profitable solar and storage projects, argues Breckenridge. He adds that, in the context of Arevon, this is easier to do as one company rather than under the existing system of Capital Dynamics affiliates.
‘We’re among the leaders’
In addition to the existing $12bn of assets, Arevon Energy’s investors are set to make additional commitments of $1.5bn to support the new company’s growth. In total, Arevon has 4.5GW of solar and battery projects that are operational, in construction or in development, as well as a 3GW pipeline.
Breckenridge is confident that Arevon Energy will be at the forefront of the storage sector: “It’s hard to find good numbers on storage, but we know this puts us in a leadership position,” he argues. “Whether we’re the largest or one of the largest, we’re certainly a big leader in the sector.”
The Capital Dynamics team has a track record when it comes to big-ticket storage projects. In June, the firm turned on the 100MW / 400MWh Saticoy standalone battery facility in California, which was managed by Arevon Asset Management, a responsibility that will be passed on to Arevon Energy.
Breckenridge’s focus in recent years has been on solar, and the role of storage is growing. He says that, in comparison to wind, solar “generally offers a better risk-reward balance” for investors, though he adds that it does not mean Arevon Energy has ruled out investing in wind projects.
“The thing with solar is that it works so well with lithium-ion batteries,” Breckenridge explains, adding that this is due to the potential that short-term battery storage offers for peak load shifting.
Yet while Breckenridge acknowledges that the momentum behind lithium-ion batteries has grown rapidly over the last three years as costs have fallen and market demand has grown, he also warns that the technology is unlikely to be the best long-term solution for all applications.
“They [lithium-ion batteries] are quite viable, but they have a very big problem in that they don’t scale very well,” Breckenridge says. “If you want to double the size of your lithium-ion battery system then you have to buy twice as many batteries, where other things potentially do scale better. We have to continue to look for those things – but, for now, it isn’t a very big list.”
Supply shortage concerns
Breckenridge says lithium-ion batteries have opened such a large gap in terms of their installed capacity that it could be difficult for other technologies to catch up.
“It does mirror the situation that solar was in, when you go back to all the companies that went out of business in 2009 and 2010 when it was crystalline solar that won the war,” he says. But Breckenridge adds that Arevon Energy will be looking at other technologies including hydrogen, which could be good for long-term storage and work well with wind.
However, he expects that lithium-ion battery prices will fall less in the future – when compared with the “precipitant straight line” exhibited in recent years – due to growing demand: “I think people that are bidding for projects expecting the price is going to come down in 2022 or 2023 may have trouble if they don’t have good supply,” he warns.