Dive Brief:
- Funds managed by Blackstone Energy Partners on Wednesday purchased the commercial and industrial subsidiary of Canadian energy storage firm NRStor, the latest sign that the finance community increasingly sees energy storage as a safe bet for future growth.
- Blackstone cited "ambitious" renewable targets being adopted across North America as a driver behind the acquisition.
- NRStor C&I L.P., which builds turnkey battery storage installations for a variety of customers, last year launched an initiative with Honeywell to build 300 MW of battery storage in the U.S. and Canada, which would be one of the biggest roll-outs of storage in North America.
Dive Insight:
Research firm Mercom Capital Group found in a report earlier this year that corporate funding of battery storage companies rose from $1.3 billion in 2018 to $2.8 billion in 2019. Venture capital and private equity made up over 60% of that funding.
Meanwhile, VCs and private equity made up only 12% of solar's financing, while debt and financing were much more important than they were for storage, indicating that storage is still seen as a riskier investment than more mature technologies.
"The battery storage market is still small compared to solar or wind but the potential is enormous and investors recognize that," Mercom CEO Raj Prabhu said in an email to Utility Dive. "Funding activity has increased in this space and financial institutions are getting more comfortable with storage technologies, its economics, and the role it plays in the energy infrastructure."
The Blackstone deal with NRStor shows that increasing state procurement of energy storage could be providing more certainty to the storage market and reduce risks for investors.
"Battery storage will play an important role in the North American power grid and be critical to achieving ambitious renewable targets," Blackstone Energy Partners Senior Managing Director Bilal Khan said in a statement.
In addition, emissions reduction targets from regulators combined with the falling costs of lithium-ion batteries are causing banks to do more lending to storage developers, according to the Los Angeles Times.
The terms of the NRStor C&I acquisition were not disclosed. But Blackstone pointed to NRStor's ability to grow from Canada into the U.S. with "a scalable platform built to adapt to new market constructs and opportunities."
The acquisition comes as new state mandates are likely to expand storage to parts of the country where it has not had a large presence so far. For example, Virginia, a state with "barely any storage" according to a Bloomberg New Energy Finance report from February, is adopting a target of 2.4 GW by 2035.
"More states are likely to unlock energy storage through targets or other regulatory mechanisms that encourage utilities to consider energy storage in procurement plans," the BNEF report said.
Beyond state clean energy goals, the potential return for investors from energy storage is also being enhanced by the increasing popularity of solar-plus-storage projects, according to BNEF Americas chief Ethan Zindler.
"Solar-plus-storage projects are winning RFPs" for utility-scale power, he told Utility Dive, a phenomenon that has appeared in just the last few years. Because the battery systems provide backup to the solar energy, these projects are able to sign contracts that include additional payments for capacity.
"They would not be able to generate the same kind of cash flow without the storage component," Zindler said.
Last year, BlackRock, one of the largest asset managers in the world partnered with General Electric to create Distributed Solar Development, which builds solar-plus-storage projects. In December, BlackRock raised capital for a $1 billion fund that will invest in renewable power, including energy storage.
A BlackRock Real Assets executive has said that he sees opportunities for more investments in battery storage with the newest fund.
