Despite increased investments in green energy, including hydro, wind, and solar, these clean energy sources still encounter inefficiencies, causing oversupply or undersupply problems during peak demand. Newton Investment Management suggests that battery energy storage systems (BESSs) could offer a potential solution to this issue.

“With recent advances in battery technology and declining costs of battery units, there has been growing interest in the BESS industry, with an increasing number of BESS solutions being introduced globally, providing a possible solution for power grids looking to manage intermittency of supply,” writes Paul Flood, Portfolio Manager and Strategist at Newton IM. 

Additionally, Flood contends that investing in energy-storage services through BESSs can offer attractive yields and capital growth prospects, making it an appealing investment option.

Subsequently, the asset manager elucidates the challenges investors might face while investing in the BESS industry. The first one is that the simultaneous transition to renewables and electric vehicles (EVs) has heightened competition for resources like nickel and lithium, leading to a race to secure the needed natural resources.

Along with that, as demand for nickel and lithium is projected to surge in the coming decade, the limited areas for mining nickel raise concerns about the potential impact of further sanctions on Russian exports, informs Flood. 

“… nickel mining in Indonesia is opposed by several environmental groups…The process…through which low-grade nickel is refined into the high-grade nickel required for batteries, is very carbon-intensive… It will therefore be important for investors to maintain scrutiny on these areas,” he adds. 

In conclusion, the asset manager points to the fact that despite intense growth in the green energy sectors, the world is still striving to meet demand. Flood then goes on to reaffirm his beliefs on BESSs and endorses selective exposure to companies in the electrification and decarbonisation industries.

Read the complete insight here.