Sign up Australia
Proactive Investors - Run By Investors For Investors

Batteries pivotal to power supply solution, believes Gore Street Energy Storage

Energy storage through batteries will have a key role in meeting electricity supply challenges in the UK
industrial batteries
Gore Street has a strong pipeline of battery projects

UK energy regulator Ofgem has just unveiled proposals for when people start to recharge electric cars en masse.

Flexible charging and off-peak use will enable the grid to handle any upsurge in demand without the need for new power stations or expensive infrastructure, said the UK regulator.

WATCH: Gore Street Energy Storage Fund investing in a 'multi billion pound opportunity'

Through flexible charging, some 60% more vehicles might be charged.

If nothing else, it highlights how stretched the grid is likely to be by the mass adoption of electric vehicles.

Alex O’Cinneide, chief executive of Gore Street Energy Storage Fund PLC (LON:GSF), understands this fully and says it’s a major problem for the UK.

“Nuclear and coal-fired power stations are being de-commissioned and government, industry and the utilities face serious challenges over peak demand and how to manage a complex energy infrastructure with a significant renewable element.”

Energy storage through batteries will have a key role in meeting these challenges, he adds.

One of the already acknowledged problems with renewable energy is matching demand and supply.

Matching supply and demand

Wind and solar only generate electricity when conditions are right and marrying those with times of peak demand has been a tough nut to crack.

Industrial scale batteries can solve this problem, says O’Cinneide.

The technology has come on in leaps and bounds in recent years, helped in no small measure by the work of electric car maker Tesla.

Gore Street’s portfolio currently consists of two assets - Bridgend in Wales, which uses a Tesla battery, and the Boulby mine in Yorkshire where NEC, one of Gore Street’s major backers, has supplied the unit.

Combined, the two sites have the capacity of 10Mw, but the plan is to increase the portfolio size to 45Mw over the remainder of the year.

That would be sufficient to lift the projected dividend from 4p in the current year to 7p.

It’s a punchy dividend target, but O’Cinneide believes Gore Street can produce higher returns than a standard renewable investment.

The target of a 12% return is achievable through the greater flexibility of batteries, he says.

A solar/wind group in the UK is basically selling electricity and receiving a revenue stream.

Multiple revenue streams

Batteries though can provide different revenue streams - such as intervention, peak pricing and storage - all of which are critical to the grid and can boost the fund’s returns.

“It makes for a diversified revenue base – or better quality of earnings as different things add to the mix.”

Gore Street specialises in lithium-ion batteries and chooses substantial suppliers with deep pockets such as Tesla, Nippon Koei and NEC.

“Lithium-ion has been around a long time and has very low technological risk, while customers also come with low counterparty risk.”

O’Cinneide is convinced energy storage is a compelling story, but so far, the market seems to want more hard evidence.

When it floated in May, the original plan was to raise £100mln but eventually, this was scaled back to £30.6mln.

O’Cinneide says the newness of the theme was a factor - Gore Street is possibly the first listed energy storage fund in the world and certainly the only one in London – but he remains undeterred.

The plan now is to invest what’s left of the float money and come back again for more once the concept has clearly been demonstrated.

“This is not a just a renewable energy story but an energy story full stop.”

Shares are 99.8p, valuing the group at £30.5mln.

View full GSF profile View Profile

Gore Street Energy Storage Fund PLC Timeline

No investment advice

The information on this Site is of a general nature only. It does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions. You acknowledge and understand that neither the Company, its related bodies corporate, the information providers or their affiliates will advise you personally about the nature, potential value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter. You should read our FSG and any other relevant disclosure documents and if necessary seek persona advice prior to making any investment decision.

You understand and agree that no Content (as defined below) published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person.

You understand that in certain circumstances the Company, its related bodies corporate, the information providers or their affiliates may have received, or be entitled to receive, financial or other consideration in connection with promoting, and providing information about, certain entities on the Site and in communications otherwise provided to you.

You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate. From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

Before you act on any general advice we provide, please consider whether it is appropriate for your personal circumstances.

© Proactive Investors 2018

Proactive Investors Australia PTY LTD ACN:132787654 ABN:19132787654.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use