Gore Street talks CEE market approach

As of the end of its most recent financial year (ending 31 March, 2023) the Fund had 296.1MW operational and 881.6MW in pre-construction or construction across those markets. It only acquires projects which are ready-to-build (RTB).

However, the Fund has seen its share price decline over the last year as its core GB market begins to saturate, as have the two other UK-listed energy storage funds, managed by Harmony Energy and Gresham House. Now is therefore as good a time as any to internationalise further into markets with more runway.

Kowalewska-Montfort’s colleague John-Michael Cheshire discussed its approach to the CEE region in this Q&A with Energy-Storage.news, shortly after Harmony Energy’s Poland’s director did the same earlier this week.

Energy-Storage.news: Which Central and Eastern Europe (CEE) markets is Gore Street targeting?

John-Michael Cheshire: As the Investment Manager of Gore Street Energy Storage Fund, London’s first internationally-diversified energy storage fund, we are constantly exploring opportunities in new potential markets. Poland has certainly caught our attention as an emerging market for energy storage, while interesting activity is emerging in Hungary and Austria.

What is the business case for each one?

These countries are in the early stages of developing their energy storage markets, providing
attractive potential for entry. As in more mature markets, intermittent renewable growth as well as
impending coal-fired power plant retirements drives the increasing opportunity for BESS.

Poland awarded long-term capacity market contracts to 130 MWh of energy storage in December 2022 at the equivalent of US$93/kW/year, and 16GW of projects received preliminary registration for this year’s
auction. This suggests viable projects could be on their way as the country looks to increase its
renewable energy penetration, creating more demand for flexible assets like energy storage to
deliver grid services.

Due to our existing presence in Europe through the Cremzow project in Germany (acquired in March last year), we have first-hand experience operating energy storage during the volatile periods of Europe’s energy system experienced in the early months of the Russian invasion of Ukraine. This geopolitical context has illustrated the advantages of an accelerated transition towards cleaner, secure power and energy storage will be crucial for many countries in the region.

How do the challenges (supply chain, market modelling, grid etc.) differ from Gore Street’s
established market (UK)?

Unlike the markets in which Gore Street Capital is already active – the UK and Ireland, Germany and
the US – the market conditions to smoothly integrate energy storage systems have yet to be fully
developed in the CEE area due to the comparatively small number of projects.

We may be able to lean on existing relationships with developers active in the region to develop networks and knowledge but, as an outside entity coming in, connecting with grid operators, landowners, route-to-market providers and optimisers would all still need to be achieved.

Another consideration is the size of projects available. Our global supply chain would ensure we are
able to deploy systems when needed but if these markets develop as GB did with smaller projects
than we build now, we would need to ensure such projects represent value to our suppliers and,
ultimately, the fund we manage.

Will the strategy also be to acquire in-development projects, and at what stage of development
would they be acquired? (development complete/ready to build etc.)

Our mandate for investment has been designed to ensure we do not take on development risk on
behalf of the fund. We, therefore, only consider ready-to-build projects that have secured planning
permission, land rights and a grid connection.

Would local optimisation capabilities be sought, or would Gore Street look to partner with its
existing optimisation partners?

We would explore the possibility of finding new partners in the country, but we also have an extensive network of optimisers across our portfolio that we can tap into if they have capabilities across the
region.

To what extent is the push into CEE and other markets driven by market saturation in the UK?

International diversification has always been our strategy, even before the market saturation that
has occurred in the GB market. We identified the vulnerability of exposure to a single market back in
2018, which is why we have invested in a c.1.2 GW portfolio spread across five energy markets in
four countries.

GB remains an important market for us, and any further expansion overseas will only
continue our existing strategy of increasing access to as many revenue streams as possible while
minimising capital expenditure.

Energy-Storage.news’ publisher Solar Media will host the inaugural Energy Storage Summit Central Eastern Europe on 26-27 September this year in Warsaw, Poland. This event will bring together the region’s leading investors, policymakers, developers, utilities, energy buyers and service providers all in one place, as the region readies itself for storage to take off. Visit the official site for more info.