Last week, renewables developer and investor Hazel Capital was acquired by Gresham House in an attempt to take advantage of the opportunities present by "one of the fastest and most sought-after market segments in the alternatives sector", specifically energy storage.
Tony Dalwood, chief executive of the asset management group, explained to Solar Power Portal what the acquisition means for both Gresham House and Hazel Capital; what projects will be brought forward from the existing pipeline; and what uncertainties lay ahead for UK energy storage.
Why has Gresham House decided to enter the energy storage market through the purchase of Hazel Capital?
We're buying Hazel Capital which is an established renewables [company], historically focused particularly on solar and wind where [it] has a decent amount of assets under management. The last three years they spent quite a bit of time developing and executing on energy storage, of which they have now got over 30MW of operational assets. In the short term that should go up to 85MW of operational ESS [energy storage systems] and then a follow-on pipeline of over 100MW on top of that.
So really we're backing a team who's delivered in the renewables sector in the past, and secondly we think there's more to go for in renewables. Battery storage is one aspect where we recognise that it is at the start of its investability from an institutional standpoint.
What kind of opportunities are you seeing in Hazel's pipeline?
We're looking at their pipeline, which involves projects like subsidy-free solar and wind through to energy storage where there is a well-developed pipeline, into EV charging infrastructure as those are the areas of progress and product development.
How long have you been considering getting involved in the storage market and has the language and investment coming from government in that time helped you make the decision?
About 18 months, and it hasn't played a role but it's good to hear that the government recognises that the requirements are increasing for grid rebalancing and storage capability. But the actual structural, commercial opportunity is what we focused on.
There's quite a lot of uncertainty around UK energy storage at the moment, particularly with changes to the grid services market being planned by National Grid for next year. Did you consider this when planning your entry into the sector?
It's definitely been part of the process of analysis and consideration during the appraisal. Our summary is that this is a growing area of demand, grid rebalancing will continue to grow whether there is a change in the National Grid operation of that and what sort of contracts they're putting out to tender, the specification has yet to be determined. But the growth of requirement for grid rebalancing will still be there and it will be larger in the years to come than it is today.
How will the acquisition affect the day-to-day of Hazel Capital? Are you going to be hands-on or will the management team at Hazel continue in the same vein as previously?
They will very much become part of the Gresham House group where we aim to support them in their central services, whether that be financial compliance though to investor relations and communication and then finally into the areas of product development and fundraising. So there's going to be a structural integration of the business.
The subsidy and policy landscape for UK renewables has changed fairly rapidly over the last 18 months towards an subsidised model; are you expecting further generation projects to be brought forward or is the focus just on energy storage with Hazel Capital?
We'll be focusing on energy storage amongst other things with Hazel and the team. We're not building any subsidy based component into any of our pipeline in renewables. Energy infrastructure now has tariff-free or subsidy-free solar projects going to market so I think we intend to do all of the above but nothing that we anticipate will have a component of subsidy.