NextEnergy Solar Fund Ltd (LSE:NESF) said it made its first investment in the UK's energy storage sector with the formation of a £100m joint venture targeting up to 250MW in projects.
The solar power-focused investment trust established the venture with Eelpower Limited, a UK battery storage specialist. NESF owns 70% of the partnership.
The joint venture already signed its first acquisition of a 50MW standalone battery storage project in Fife, Scotland, that is expected to be grid-connected in 2022.
Adding battery storage assets to NESF’s portfolio of solar power projects follows the expansion of the company’s investment mandate last year, allowing up to 10% of gross asset value to be invested in energy storage.
NESF said the new project offers attractive revenue opportunities which include arbitrage energy trading, providing balancing capability for the national and local grid and tapping into the longer-term revenues from the UK capacity market.
Eelpower, whose strong track record includes contracts with Centrica and EDF as well as its own assets, will work with NESF’s investment manager, NextEnergy Capital, to source further acquisition opportunities, as well as providing engineering, procurement, construction and ongoing asset management services to the storage assets.
Kevin Lyon, NESF chairman, said the move into energy storage was significant, “forming an important part of NESF's future growth plans”.
“The joint venture lays the foundations and provides momentum for NESF's pipeline of energy storage assets whilst also ensuring collaboration with a specialist partner, Eelpower, in operating these assets.
“NESF is now demonstrably progressing its exciting growth strategy both in UK energy storage and international expansion of its portfolio of solar projects."
NextEnergy Capital has been involved in the energy storage space for several years, having acquired two small-scale batteries back in 2017, UK managing director Ross Grier said.
“It is encouraging to see that battery technology is now at a stage where it is feasible to introduce projects like this to the NESF portfolio. We are looking forward to securing further investment opportunities in this sub-sector alongside our partner Eelpower."
Analysts at Shore Capital said they believe that once operational, “these assets would generate a revenue stream that is relatively uncorrelated with NESF’s core business, complementing the existing portfolio".