We hear from industry sources about why we’ve seen a flurry of investors acquiring energy storage developer-operators in the UK and Germany, Europe’s two largest markets by BESS deployments.
The two countries have the most grid-scale BESS online today on the continent, with the UK at 4GW/4.9GWh and Germany with 937MW/1,322MWh as of the end of 2023 as per figures published in our recent Energy Storage Report 2024.
Our two sources, active in each market but speaking anonymously, explain why we’ve seen numerous deals for large-scale BESS developers and operators in recent months – beyond the obvious fundamentals underlying energy storage’s attractiveness as a market to invest in.
UK: falling revenues, and more deals to come
The UK in the second half of 2023 saw numerous large investment firms buy independent BESS developers and operators. EQT bought Statera, Brookfield bought Banks Renewables, Mubadala Investment Company and KKR acquired Zenobē while Searchlight acquired Gresham House, the manager of the Gresham House Energy Storage Fund plc (GRID).
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These deals coincided with a period of rapidly falling revenues in the UK market, as covered extensively on Energy-Storage.news, and that is not a coincidence, as a financial advisory source explained.
“It’s now a buyer’s market, with valuations dropping due to a mix of factors in the energy market coinciding with various deadlines for project grid connection fees meaning a bit more urgency to sell,” they said.
“People operating portfolios of BESS assets will need to find buyers if they don’t have patient capital sitting behind them.”
More deals are expected to materialise this year, our source added.
Germany
The start of 2024 has seen two major companies in Germany’s large-scale battery energy storage system (BESS) market transacted on.
Oil and gas major TotalEnergies acquired developer Kyon Energy in January while infrastructure investors Brookfield (through its X-ELIO arm) and NIC invested in system integrator and developer Eco Stor, the announcement of which implied certain shareholders sold stakes as part of the deal.
These deals are partially market-driven but also the result of specific activities at both companies.
“These deals have been driven by the German market becoming mature. It’s had its first really good year or two of deployments,” a software provider source said, speaking anonymously.
But they also pointed out that for Eco Stor, the company has moved from mainly being a technology provider and system integrator to developing its own substantially-sized projects with a pipeline of several 600MWh BESS projects.
This obviously requires additional financing, our source said, adding that Kyon Energy may also be expanding up the value chain from its existing approach of developing and selling projects to long-term owners like investor Obton and utility Verbund.
Spokespersons representing X-ELIO, NIC and Eco Stor declined to comment when asked by Energy-Storage.news, while Kyon Energy gave us this statement:
“This partnership with TotalEnergies represents an important moment for Kyon Energy as we aim to become one of the leading flexibility providers in Europe. By joining forces, we are strengthening our position in the German electricity market and contributing directly to the transition to a more sustainable system.”
