For the past year I have been building my
climate-friendly 'green' portfolio. This includes a mix of renewable energy
infrastructure trusts such as TRIG and Bluefield Solar and more recently, several individual companies such as Orsted and AFC
Energy. The UK is moving quickly to replace its dependence on fossil fuels and
embrace clean energy alternatives such as solar and wind.
However, the national grid system needs to match
supply with demand. This is easier to do with coal and gas but with
intermittent solar and wind, it becomes more unpredictable and it's therefore
important to introduce forms of storage to smooth supply throughout the
national grid system. The greater the proportion of wind/solar renewable energy, the greater the need for storage to balance the grid.
We are now at the stage where generation from
renewables is matching fossil fuel so I expect the demand for storage solutions
to increase from here. Coal is due to be phased out completely by 2025 and
there is increasing pressure on policy makers to reduce our generation from gas
due to climate change emissions. Our government have legislated for net zero emissions by 2050 which means that gas needs to be replaced by clean energy over the coming 30 years - maybe sooner. We need utility-scale storage back-up to make this a reality.
In the past year planning applications for battery
storage have increased by 50% from 6,900MW to 10,500MW today according to a
report from RenewableUK. This has prompted me to take another look at investing
into this fast-growing sector of the clean energy revolution.
Gresham House Energy Storage (GRID)
This investment trust came to the market in 2018 and it has been on
a back burner as a possibility for my portfolio since reading an excellent article last year by
IT Investor. It currently owns seven utility-scale energy storage systems
around the UK with a combined capacity of 124MW. The most recent addition was
the largest - a 49MW project at Red Scar near Preston which should be
operational later this month.
The company released half year results in August (link via Investegate) which suggested a strong share price performance to end June - up 5.4% and
confirmed dividend of 4.5p for 2019.
Commenting on the Fund's results, John
Leggate CBE, Chairman of Gresham House Energy Storage Fund PLC said:
"The UK needs more grid-scale
batteries. The growth in renewables demands this and recent events including
the recent National Grid outage on 9 August provide confirmatory evidence that
batteries can make a difference. The Fund is very well-positioned to build on
its initial premise and to grow to significant scale and materiality. The Board and the Gresham
House Team have the bench strength, capabilities and experience to create an
impactful portfolio of high-performing assets in this sector which is becoming
of critical national importance."
Shortly after these results, GRID completed a
further placing of new shares raising an additional £42m which brings the total
raised since launch to £200m which makes it the leading player in the UK
grid-level energy storage field. The company have three further projects totalling 105MW which are due to be completed by March 2020 which will increase capacity to 229MW.
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National Grid Control Room |
Conclusion
In October, the government (BEIS) announced a consultation
on relaxation of planning regulations for utility scale storage which should be
a significant boost for this sector as it will mean larger projects over 50MW
will be cheaper to progress. The consultation period ends on 10th December so
it will be interesting to see what they decide.
The company is due to go XD for a quarterly
dividend payment of 1.0p later this week and has a target pay-out of 7.0p for
the coming year.
We are due to host the UN climate change COP26
next year and the government will be keen to demonstrate its climate
credentials to the world so I am hoping this will give a boost to all things
related to renewable clean energy including storage.
This acquisition is not without a degree of risk.
The energy market is complex with many players and subject to government policy
changes as well as competition from some of the larger energy companies likely
to be looking at the increasing attractiveness of this sector. However, the
company appears to have established itself over the past year so, as I like to maintain
a diverse portfolio, hence the reason for adding this trust to my 'green'
collection. My initial purchase was 105p in my ISA.
As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!