In the last ten days, renewables investment giant Copenhagen Infrastructure Partners has hit the headlines with two huge storage deals.
On 16th November, the firm agreed to partner with Hydrogen Renewables Australia on the 5GW Murchison Renewable Hydrogen Project. And last week, the Danish firm moved into pumped hydro by buying the 393MW Swan Lake and 1.2GW Goldendale projects in US states Oregon and Washington.
The deals are the opening salvos of a new push into storage for the green investment giant, which manage seven funds with commitments totalling €12bn.
Historically, CIP has focused on offshore wind. Its projects include the 588MW Beatrice in UK waters, 589MW Changfang & Xidao in Taiwan, and 800MW Vineyard Wind in the US. But this focus has evolved in the last few years.
It has expanded into sectors including onshore wind in the US, for example. These two storage deals are a continuation of that broader strategy.
We see these deals as noteworthy for two reasons.
First, it is interesting from a company level. CIP is branching out from offshore wind to storage projects in Australia and the US, which hints at how it will look to pair the technologies in 2021 and the years ahead.
Second, the deals represent a change that has been long anticipated in the storage industry: growing interest in storage from institutional investors.
We’ve seen vast capital injected into the wind and solar markets over the last decade, and storage is far behind. This is understandable. Utility-scale wind and solar are more mature than utility-scale storage. But the interest from firms like CIP, and the investors in its funds, shows that storage players may be able to secure the major investment for the market and technologies to evolve.
That’s why we expect the sector to welcome these deals with open arms.
For example, HRA chairman Terry Kallis said in the press release that “our partnership with CIP will enable the Murchison Renewable Hydrogen Project” to produce “competitive hydrogen exports for the Asian markets”. This shows that HRA sees backing from CIP as crucial in its plan to be a hydrogen leader in Australia and the wider Asia-Pacific region.
There will also be more projects that appeal to these investment giants.
Global storage capacity currently stands at 300GW, including pumped hydro. But Wood Mackenzie predicts that global storage capacity will increase by 31% each year, reaching 741GW in 2030. This will re-shape the energy system as long as the money is there to make it happen.
These deals also show a further trend we’ve seen in recent months: the willingness of companies that have traditionally focused on one renewables sector to expand in others. Investors have long embraced wind and solar, but now they are doing so in storage too.
CIP is just one example of how firms are beginning to spread their tentacles across solar, wind, hydrogen, pumped hydro and battery storage. This will help unlock more investment, and should be good news for investors that want to finance projects and would like to do so with a cash-rich renewables expert.
Finally, it’s a show of support for pumped hydro, which is simultaneously the largest source of utility-scale energy storage in operation now – but also one of the least sexy! Where CIP leads, we would expect other investors to follow.
Commenting on the US pumped hydro deal, CIP senior partner Christian Skakkebæk said that storage technologies are “a unique and valuable asset class that will be a key resource in the global transition to renewable energy”.
We have long known that storage can help manage the intermittency of wind and solar power, but the concern from the institutional world has tended to focus on whether storage assets represented a compelling investment case.
Those fears are now starting to be recede.
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The World Bank has predicted that conflict in the Middle East could lead to a dramatic spike in oil prices, which is linked to increases in food prices – however it’s argued that the forecasts do not take into account the ability of energy storage to meet demand