Battery Storage Investments: Balancing High Potential with Regulatory Transparency
Private capital is becoming increasingly crucial for implementing the energy transition, but the financing landscape for battery energy storage systems (BESS) needs to evolve.
While financiers are showing growing interest in battery storage, complex regulatory frameworks often stand in the way, making non-recourse financing for this relatively new asset class challenging. The key to unlocking the vast potential of battery storage lies in balancing ease of access and navigating volatility.
This was one of the central messages from the second Investor Summit of the Federal Association of Energy Storage Systems (BVES), which brought together over 300 international investors, banks, funds, and insurance companies in Berlin.
The focus was on exploring the intricacies of investing in storage technology. Urban Diaperen, managing director of the BVES, emphasized, "A few years ago, the financial sector had to get used to these new players. Today we are experiencing widespread recognition and enormous interest in this market. Private capital helps advance the energy transition without subsidies."
However, the commitment to achieving meaningful progress requires more than just enthusiasm. Transparency and regulatory stability are essential for attracting continued investment. Diaperen directly appealed to the incoming German government, "Let us work together to create space for private capital and investments to shape our future energy system."
The discussion revolved around the explosive growth of the energy storage market, but also the complexity of navigating the current state of development, according to Maria Leis of Breakthrough Energy: "We are not yet on the right track toward widespread storage solutions. We need financial instruments that make these investments truly attractive for the private sector."
Flexibility is paramount. A mix of short- and long-term storage technologies is crucial for meeting the diverse needs of the evolving energy landscape. Aurora Energy Research’s Casimir Lorenz highlighted this point, noting the constant evolution of the business model for battery storage. He added that, "Regulatory changes in capacity markets heavily influence this development."
Addressing the legal framework, Christian Bauer and Britta Wissmann from the law firm Watson Farley & Williams emphasized that while large-scale storage is often viewed as illiquid. However, they presented solutions: "Flexible grid connection agreements and cable pooling could address Germany’s grid connection issues. Further flexibilization would remove regulatory bottlenecks for CSTRESS}}{[]{.
With investment costs rapidly declining – plunging almost 40 percent in the last twelve months – the picture for these projects becomes increasingly appealing. "However, the financial mateship
. Lasting cost-effective solutions for pre-contractual work remain a key challenge, alongside increasing project sizes and duration, according to Ralf Bucher from H&MV Engineering. Moreover, network operators are moving toward even higher voltage levels, adding further complexity and cost considerations.
Lars Stephen from Fluence painted a positive picture on the European battery market, noting diverse market potentials exist, “Earning money from battery storage is easier than ever. However, individual risk profiles and desired return on investment play a crucial role.”
Harnessing this vast, albeit volatile, potential requires innovative approaches. Artificial intelligence-driven optimization platforms are crucial for gaining a competitive edge. Steffen Schülzchen, CEO of Entrix, shared, “More than 350 contracts are concluded daily in various markets; 95% are done virtually, illustrating the speed and agility needed in this increasingly competitive field.”
Lennard Wilkening from Suena provided detail on pricing models, emphasizing tolling agreements as a way to secure contracted revenue and maximum flexibility for exploiting insulating against fluctuating market dynamics.
The future of battery storage is bright, brimming with opportunity
What specific policy changes could encourage long-term investment in battery storage?
## Battery Storage Investments: A Balancing Act
Joining us today is Urban Diaperen, Managing Director of the Federal Association of Energy Storage Systems (BVES), a driving force behind the recent Investor Summit on Battery Storage in Berlin. Urban, thanks for being here.
**Urban**: My pleasure.
**Interviewer**: The summit brought together hundreds of investors, clearly demonstrating the growing interest in battery storage. But your message was strong; enthusiasm alone isn’t enough. Could you elaborate on that? [[1](https://www.whitecase.com/insight-our-thinking/battery-energy-storage-systems-complex-promising-route-clean-energy-transition)]
**Urban**: Absolutely. While the financial sector is becoming increasingly aware of the potential of battery storage in driving the energy transition, complex regulatory frameworks pose a significant challenge. For new players, securing non-recourse financing for this relatively new asset class is difficult. We need transparency and regulatory stability to truly unlock the vast potential of battery storage and attract long-term investment.
**Interviewer**: So, what are the key hurdles investors are facing?
**Urban**:
Many investors desire more clarity on long-term policies related to battery storage. A continuously evolving landscape makes it challenging to predict returns and manage risk. We need a stable framework that encourages investment, not discourages it.
**Interviewer**: What specific changes would you like to see from the incoming German government?
**Urban**: We need a collaborative approach. We advocate for open dialogue and partnership between the government, industry stakeholders, and investors. This ensures a regulatory framework that fosters innovation and attracts private capital willing to spearhead the energy transition.
**Interviewer**: You mentioned the importance of long-term solutions. Could you explain how this translates to investing in battery storage?
**Urban**:
A mix of short- and long-term storage technologies is crucial. Different technologies serve different purposes, from balancing short-term fluctuations in the grid to providing long-term storage solutions for seasonal variations in renewable energy generation.
We need a balanced portfolio, and investors need to understand the diverse landscape of battery storage solutions to make informed decisions.
**Interviewer**: Thank you, Urban, for sharing your valuable insights. It seems the future of battery storage depends on balancing the immense potential with clear regulatory guidelines that encourage long-term investment.
**Urban**: Exactly. It’s a critical balancing act, and collaboration is key to unlocking the full potential of battery storage in shaping our clean energy future.
