Global asset owners eye next big thing in net zero: energy storage
In the global push towards renewable energy, energy storage is emerging as the linchpin of the transition.
As intermittent sources like wind and solar proliferate, the ability to store and dispatch power on demand has become increasingly crucial, attracting major institutional investors to the sector.
Macquarie Group
"Energy storage isn't just an add-on to renewable energy—it's the key that unlocks its full potential," said Ed Northam, head of renewable energy and head of Asia Pacific for Macquarie Asset Management Green Investments.
"As we transition from global electricity grids to rely more heavily on intermittent resources like wind and solar, storage becomes the backbone of a stable, sustainable energy future."
The potential of energy storage extends beyond intermittency, he told AsianInvestor.
Battery storage for renewables is considered a game-changer in two critical ways.
It enables 'load shifting,' allowing the use of energy when it's most needed.
Equally crucial, it also provides "vital frequency response benefits for our distribution and increasingly our transmission networks," said Northam.
"This dual role is transforming how we manage and stabilise our entire power grid," he said.
LURING IN ASSET OWNERS
This versatility is attracting significant investments.
Eku Energy, a globally diversified energy storage business, was launched by Macquarie Asset Management and has secured backing from the $185 billion British Columbia Investment Management Corporation (BCI).
Major asset owners, including the $206 billion Ontario Teachers' Pension Plan, are teaming up with companies like Stem Inc to develop and manage energy storage systems.
The $1.71 trillion Government Pension Fund of Norway (GPFG) has also been investing in renewable energy and energy storage projects as part of its strategy to diversify and support energy transition plans.
The scale of the opportunity is "staggering", and the technology landscape is diverse, spanning from lithium-ion batteries to more traditional solutions, according to Northam.
“Globally, we need to rewire and reconfigure about 80 million kilometres of grid to accommodate the renewable transition. This requires massive investment and innovation across various technologies."
He expects to see advancements in battery technology, such as flow batteries, and a resurgence of traditional methods like pumped hydro, particularly in Asia.
"It's not just an opportunity; it's a necessity for our sustainable future," he said.
AUSTRALIA STORAGE
In Australia, the energy storage revolution is gaining momentum fast, according to Kylie Rampa, the chief executive officer for Queensland Investment Corporation (QIC).
QIC manages around $73.1 billion in assets operating as both a limited partner and general partner—with approximately 55% of its assets coming from the state government.
QIC
"We've created a Queensland Critical Minerals and Battery Technology Fund, which allows us to build capability and track record in this important sector before it becomes more broadly investable from an institutional perspective," Rampa told AsianInvestor.
This initiative is part of a broader strategy to position Australia as a key player in the global energy transition.
QIC's investments extend beyond traditional storage solutions.
"In climate technology, we invested in Endua, which creates hydrogen power banks."
"We're also focusing on assets that build resilient communities while delivering returns, such as desalination plants and battery storage," she added.
Paul Maguire, partner, infrastructure at QIC, underscores Australia's unique advantages.
QIC
"When you look at the energy transition, Australia is frankly blessed. Unlike Hong Kong or Singapore, we've got lots of land. We've got fantastic wind and solar resources," Maguire told AsianInvestor.
The impact of energy storage extends to remote and developing markets. Maguire highlights the work of companies like Pacific Energy.
“We're seeing a revolution in energy access for off-grid locations. It's not just about providing power; it's about enabling sustainable development in the most challenging environments,” he said.
For example, remote mines and businesses striving to meet ambitious decarbonisation goals can tap into tailored solar and battery solutions, effectively shrinking their carbon footprints.
"This is how energy storage is driving the green transition beyond urban centres, transforming industrial operations in even the most isolated corners of the world.”
CHALLENGES AND OUTLOOK
Despite the opportunities, improving our energy networks faces serious capital challenges, said Macquarie’s Northam.
"We need huge investment just in our distribution and transmission networks in general,” he said.
A 2023 Reuters report found that "energy storage is set to overtake solar as the leading technology for energy transition investments in the next three years," with 43% of respondents planning to invest in the technology within three years.
Government policy support is also driving the transition according to QIC’s Rampa.
"The federal government is supporting the energy transition and firming up Australia's position as a renewable energy superpower through various initiatives like the Powering Australia plan, the Capacity Investment Scheme, Rewiring the Nation, and Safeguard Mechanism reform,” she said.
As the world grapples with reducing carbon emissions, energy storage is emerging as a flexible solution.
Northam sums it up: "On the role of battery storage, it's not just about load shifting from off-peak to peak periods, which is what everyone focuses on – it’s about how do you get to 24/7 energy generation?"