Battery storage M&A powers into 2024

Investment in the battery energy storage sector reaches record highs as the need for flexibility in the renewables sector increases

Battery energy storage systems (BESS), which enable utility companies and grid operators to access pools of surplus renewable energy on demand that would otherwise be wasted, play a central role in the global energy transition. As a result, investors are targeting BESS assets as consumers, businesses and regulators increasingly prioritize net zero and other sustainable-energy goals.

BESS investment has risen consistently over recent years. According to Inframation, 227 battery storage M&A deals were announced in 2023, up 15.8 percent from the year before. These transactions were worth a combined US$24.1 billion, nearly triple the value recorded in 2022. In both volume and value terms, 2023 represented a new dealmaking high for the subsector.

M&A activity in Q1 2024 points to another strong year for the BESS space, with 69 BESS-related transactions announced, per Inframation. If it keeps up the pace, the subsector will enjoy another record year in deal volume terms.

US market holds wide appeal 

The US is leading the global race in the development of battery storage, with demand for BESS expected to increase sixfold by the end of the decade. Capacity is expected to almost double in 2024 to more than 30 GW, as development of energy storage projects accelerates in line with the rapid growth of variable solar and wind assets.

Large financing deals announced this year speak to the US’s leading position. In mid-February, Arevon Energy and Blackstone closed a US$350 million deal relating to the 200-MW Condor Energy Storage Project in California. Later that month, North Carolina’s Strata Clean Energy secured US$559 million in financing for a 255-MW battery storage project in Phoenix, Arizona. The project will store enough electricity to power 50,000 homes in the state during peak summer conditions for two decades.

These transactions follow the US$1.6 billion acquisition by French multinational Engie of Houston-based Broad Reach Power. The deal, announced in August 2023, was the largest BESS platform acquisition of last year and demonstrates the sizable potential for BESS investments in the US. Broad Reach is the leading developer of energy storage projects in Texas and California, the two largest battery storage markets in the country. According to the US Energy Information Administration, California boasts the most installed battery storage capacity, at 7.3 GW, followed by Texas’s 3.2 GW, while the remaining US states have around 3.5 GW.

The US market also continues to benefit from policy support under the Inflation Reduction Act. The IRA unlocked investment tax credits for standalone BESS projects but is also driving the need for increased storage capacity through its support for renewable sources generally, including, in particular, the expanded production tax credit.

UK is a frontrunner in Europe 

Across the Atlantic, the UK is leading in BESS development in Europe, with the highest installed capacity and growth prospects, according to Aurora Energy Research. The UK’s battery storage capacity is projected to expand to 24 GW by 2030, attracting investments of up to US$20 billion and accounting for 9 percent of global installation capacity.

Major private investors are looking to the UK for the next big thing in battery storage. In February 2024, the FTSE 250-listed The Renewables Infrastructure Group (TRIG) acquired a 100 percent equity interest in Fig Power, a UK-based developer focused on battery storage with a 1.7-GW development pipeline.

In 2023, the largest European deal was the US$1.1 billion acquisition of a 45 percent stake in London-headquartered EV fleet and grid-scale battery storage specialist Zenobē by US buyout giant KKR. The deal, announced in September, positions KKR alongside UK investor Infracapital as joint majority shareholder of the battery storage unicorn, which has around 430 MW of contracted grid-scale storage in the UK in operation or construction and plans to expand in North America and Australia.

Another notable transaction saw EQT Infrastructure acquire Statera Energy, a London-based battery storage and flexible generation platform, in a US$620 million deal. The Swedish investor will provide growth capital to Statera as it looks to deliver 7.5 GW of flexible energy projects by 2030.

Spanish market shows promise 

Spain’s battery storage market is tipped for growth, with the sector expecting the government to approve a capacity market in the next few months. The Spanish government’s Energy Storage Strategy, first laid out in 2021, ambitiously targets 20 GW of energy storage by 2030. This represents a more than twofold increase from the country’s existing capacity, which stood around 8.3 GW in 2023. Considering this objective, compelling opportunities exist for private investors looking to capitalize on the market’s growth potential.

Several Spanish battery storage assets were targeted in deals in 2023. Perhaps most notable is the October purchase by Switzerland’s Hitachi Energy, the sustainable energy subsidiary of the eponymous Japanese conglomerate, of a majority stake in Seville-based eks Energy, a provider of renewable energy management solutions. In light of rising global demand for BESS assets and the development of next-generation systems, Hitachi sees the acquisition as a major boost to its renewables and technology portfolio.

Spain’s energy storage startups are also attracting investor attention. Earlier in the year, Spanish solar energy firm Soltec announced an investment in energy storage startup Silbat, building its stake to 12.2 percent. Through supporting innovative technologies such as those being developed by Silbat—wherein electricity is turned into heat and stored in molten silicon, before being reconverted to electricity using thermophotovoltaic cells when power is needed—Soltec hopes to stabilize both the production of solar energy and the prices it charges.

Australian BESS powers the APAC market 

Asia-Pacific is another region experiencing strong demand for BESS assets. The growing need for reliable power supplies, rising concerns surrounding security, and increasing renewables production are all factors driving demand in the APAC BESS market. According to market intelligence platform GlobalData, the region will account for 68 percent of global battery storage demand by 2026.

Backed by significant government funding and competitive market design, Australia has positioned itself as a leader in the race to deliver large energy storage projects at a global scale. With an estimated 40 GW of projects in the pipeline, the country’s battery storage capacity is expected to grow by 28 percent by 2032.

Major deals announced recently speak to the Australian market’s strength in this field. In Q4 2023, renewable energy company Octopus Investments Australia, which is majority owned by the UK-based Octopus Group, acquired the Blackstone Battery Energy Storage System. With an expected enterprise value of US$514 million once operational, it is the largest proposed battery project in the state of Queensland.

Q4 2023 saw construction start on the first stage of the Melbourne Renewable Energy Hub. Led by infrastructure developer Equis Australia, the project is 600 MW in size and will provide 1.6 GW hours of energy storage when completed. In March, underscoring the country’s appeal to international investors, ACEN Australia—part of the Philippines-based conglomerate Ayala Group—and Marubeni Asian Power Singapore announced they would invest AUD 250 million (US$162 million) in a 400-MW BESS in New South Wales.

Building a flexible future

Flexibility—specifically the ability to adjust supply and demand to continuously achieve energy balance—is of paramount importance to grid reliability as renewable sources comprise an ever-increasing portion of our power generation mix. BESS will play a crucial role in facilitating that flexibility, and dealmaking in the sector is well positioned to ramp up. Heightened demand is reflected in the investment currently flooding into the subsector, with record levels reached in 2023.

For now, assets in the US and UK seem the most likely targets in big-ticket deals. Yet up-and-coming markets such as Spain and Australia provide compelling investment opportunities, with ambitious government targets underscoring the sizeable investment gap that the private sector will gladly fill.

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