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Battery Storage: A Shifting Landscape of Risk and Return

2024-03-29

Investors in battery storage are facing a changing landscape as they navigate the intricacies of tolling arrangements, floor prices, and merchant models. However, there is a noticeable trend emerging - a growing comfort among investors with the risks associated with battery storage.

 

Tolls and floor prices offer investors a predictable income, while the merchant model, which ties revenues to market prices, introduces a level of risk but also the potential for higher returns. As stakeholders gain a deeper understanding of the risk-return dynamics in the battery storage sector, the investment landscape becomes more balanced and informed.

 

This maturing market indicates that investors are gradually embracing the potential of battery storage assets while effectively managing the associated risks. GridBeyond's latest white paper, 'Tolls, Floors, and Merchant Models: Do Higher Risks Mean Higher Returns for Battery Storage Investors?', delves into this trend. The paper is authored by Scott Berrie, Asset Development Director at GridBeyond.

 

The white paper also explores different battery storage models, their associated risks, and the potential profitability they offer.

 

Battery storage assets have various financing options available, including the tolling model, merchant model, and trading opportunities such as Frequency Response Services, Capacity Market, Balancing Mechanism (BM), and wholesale market trading. Factors such as high energy prices, capacity market auctions, new frequency response products, local flexibility tenders, and pathfinder projects have further piqued investor interest in energy storage technologies. Investors are also becoming more comfortable with the merchant risk associated with battery storage, recognizing that the market has developed mechanisms to facilitate a route to market for battery systems in the absence of long-term or government-backed contracts, explains Scott Berrie.

 

Scott Berrie, Asset Development Director at GridBeyond, commented:

 

"Storage assets present excellent opportunities for businesses to increase their revenues in line with their strategic goals and objectives while simultaneously working towards achieving net zero. With the aid of AI and a suite of trading services, businesses can generate substantial revenues by gaining full access to the market and participating in lucrative balancing services."

 

 

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