Article

Energy storage advances amp up real estate

The fast-developing energy storage market is powering new opportunities for commercial real estate, from diversifying location choices to boosting companies’ revenue and eco-credentials.

February 14, 2019

The technology behind ion lithium batteries has taken big steps forward in recent years, making onsite (also known as behind the meter) energy storage a more viable, reliable and attractive option for all types of real estate.

Research by RenewableUK and the Solar Trade Association (STA) revealed that applications for storage portfolios rose to a combined total of almost 7000 MW in 2018 – a jump of around 5000 MW since 2012. Worldwide, the energy storage market is expected to be worth more than $100 billion by 2030, according to a report by Bloomberg New Energy Finance (BNEF).

For commercial building owners and tenants, a new generation of batteries are providing a more cost-effective solution for their energy needs.

Variable tariffs, a common feature of utility bills, mean that charges for using power from the national grid fluctuate throughout the day and year. Prices surge at times of high demand, for example, during early evening and in the colder winter months. Batteries allow consumers to take energy from the grid at periods when prices are lower, and either use it or sell it to the grid when rates peak.

“Energy storage facilities can add value to real estate by enabling tenants to save money on their electricity bills and potentially generating additional revenue streams from arbitrage activities and provision of grid services” says Peter Sermon, Director of JLL’s Energy and Infrastructure Advisory.

Giving a boost to renewables

At the same time, a growing network of large-scale batteries is supporting the grid in adopting renewable energy sources, which in turn helps the country meet its carbon reduction commitments. Since solar and wind rely on weather patterns, the power they can deliver is intermittent; storage devices play an important role in helping to stabilize these fluctuations.

“The storage market will continue to grow significantly in the years ahead and will be a key enabler in realising a low carbon economy and as such will start to feature in more green marketing,” says Sermon.

A handful of pioneering commercial buildings are already leveraging this approach. In Edinburgh, the Premier Inn has declared itself the UK’s first hotel to run on battery power. Not only will this save around £20,000 per year in energy bills, it also supports the use of renewables, boosting the property’s eco-credentials.

Likewise, in London, the Emirates Stadium has installed a 3MW storage system, which can power the 60,000-seat stadium for a full 90 minutes, and save an annual 7000 tons of carbon emissions.

Opening up site selection

Energy storage in buildings could eventually begin to affect location decisions. In the UK, grid capacity is constrained. Batteries pave the way for energy intensive buildings to be located in places where the grid cannot deliver stable power.

“Warehouses, which have increasingly complex and energy intensive needs in line with the growing use of automation, could be built in locations that were previously deemed impossible due to lack of available grid power, helping meet demand for ever-faster delivery and more efficient last-mile operations,” says Sermon.

Equally, batteries are already starting to support the roll out of electric vehicles by allowing more charging stations to be installed at locations that are short on grid capacity, he adds.

While the energy storage sector surges ahead, a number of challenges remain for its development in commercial buildings. The equipment requires a significant initial investment, and the grid’s charging scheme is under review, adding an element of uncertainty to cost-benefit analyses.

Overcoming barriers

Another issue is scalability. “Unlike solar, battery storage is quite a complicated asset to operate,” explains Sermon. “To be commercially viable behind the meter batteries need to access multiple different value streams at different times and therefore need to be managed in real time, like a live trading asset responding to price, costs and demand signals as they occur. This level of asset management combined with the bespoke nature and their limited megawatt capacity makes it harder to articulate the value to landlords and tenants and to scale their deployment.”

Despite these barriers, Sermon predicts that more companies could turn to energy storage to help power their real estate in the coming years.

“As the market matures, we can expect to see a significant impact on real estate, both in terms of accommodating storage solutions and added value assets,” he concludes. “In time, this will translate to additional yield for properties – as well as support the ongoing deployment of renewables.”

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