Eelpower CEO: ‘Storage investment will cool off’

• Battery industry’s ‘extraordinary earnings’ won’t last, says Eelpower boss
• Some investors have a lack of understanding of storage, adds CEO Mark Simon
• Cybersecurity is a ‘real risk’, Simon warns

Energy storage might be a hot ticket for investors at present, but Eelpower CEO Mark Simon has some words of warning.

He believes that, while there have been some “extraordinary earnings in batteries” in the last six or seven months, a cooling off is to be expected.

He argues that, as a result, there will be a period of consolidation in the energy storage investment market as it matures.

UK-headquartered standalone battery owner and operator Eelpower was itself the beneficiary of some significant investment last year. In January 2021, it entered a joint venture with Swiss-based infrastructure manager SUSI Partners – as a result of which £80 million was deployed over a four-month period – while in September last year, Eelpower formed a £100 million joint venture partnership with NextEnergy Solar Fund, which will target the development of up to 250MW in projects.

Meanwhile, in one of the most recent developments, Eelpower signed a three-year battery optimisation agreement with Habitat Energy for two 50MW UK battery storage projects being constructed as part of the SUSI Partners joint venture.

Eelpower was founded in 2017 by Simon with co-founder and chairman Stephen Partridge-Hicks. The company now has a seven-strong team based in London.

Energy Storage Report caught up with Simon to discuss his views on the current levels of investment in the storage sector, the progress of the company’s recent joint ventures, the cybersecurity challenge, the struggle to get grid connections, and his frustrations with the mindset of some investors.

Last year, Eelpower entered into a joint venture with infrastructure fund manager SUSI Partners, how did the deal come about and what benefits has it brought Eelpower?

Mark Simon: We had the opportunity to get to know SUSI well in the past during a previous debt raising campaign, so when Richard Braakenburg [SUSI Partners' managing director, head of equity investments] joined from Pivot Power, he lined up a great joint venture between us. Since the deal’s announcement in January 2021, we’ve deployed around £80 million of funds within a four-month period. Shortly before that, we were approached by Ross Grier, UK managing director at NextEnergy, and have now partnered with their solar fund as well. It’s these experiences that we now look to replicate with a broader range of investors in the future.

Eelpower recently signed a three-year battery optimisation deal with Habitat Energy, why did you select Habitat Energy as a partner and how will this deal help?

MS: Habitat is actually the third route-to-market optimisation partner we’ve worked with. They’re an outstanding partner, as are EDF and Centrica in those first two instances. Once we’ve built these high-quality assets and commissioned them, we effectively like to look at ourselves as asset allocators and risk managers, where we can have very open conversations with these route-to-market providers to find how they can help us get the most out of these batteries. There’s a lot of competition. But what stood out for us with Habitat this time, is that they are very bright guys who are very focused on the new electricity markets, which gives them a huge edge. Similarly, this aligns with us. We're focused on building standalone batteries. So, it’s a great match for us.

How big a concern is cybersecurity for energy storage companies? Do you think cybersecurity risks are on the increase?

MS: I think that it is a real risk. And I think that no one has a complete and coherent plan for it yet. But I believe that, for us, a crucial part of combatting this risk is distributed capability. We plan to deploy up to 2GW within the UK market and this will be done through 100MW and 50MW connections up and down the country. We also don’t work with only one supplier of anything and must also be cognisant of where our supplies come from. So, our best protection now is having multiple pieces, so if something fails, we can spot and fix it before it becomes systematic, which is partially reassuring. But overall, I think leadership here will necessarily come from the grid and will require a collaborative effort from everyone.

What are the biggest challenges you face in the day-to-day running of the business?

MS: I would say there are two right now. Eelpower was founded on the basis that the energy transition threatens to disrupt the whole energy system. And the most obvious manifestation of this is the disarray of the distribution system operators and the National Grid’s inability to make connections available. Essentially, storage is in the same queue with solar for connections, creating very long delays and uncertainties. But since storage is a non-generating asset, logic suggests it shouldn’t even be in the same queue. Secondly, although this has improved over the past 12 months, the lack of understanding by investors of the dynamics and opportunities storage has to offer still presents challenges. Storage is an enormously lucrative market that will never need subsidy, but it does require investors to check everything they know about investing in renewable technology at the door. It’s unhelpful to bring a ‘PPA mindset’ into a discussion about storage.

What do you think will be the emerging trends in storage in the coming year?

MS: I think there will be a concentration of investment around people who know what they’re doing and a maturing of the industry around such organisations. There’s so much heat around the market at the moment – currently, most batteries in the UK are earning twice in revenue terms compared to what our extremely healthy model suggests. This is as unreal as that period in 2019 when no one believed anyone could ever make money out of batteries, and that wasn’t true then and this isn’t true now. Yes, we’ve had six or seven months of extraordinary earnings in batteries, but that’s not always going to be the case. It is a market where investors will continue to need the smartest, most dedicated of partners.