How GSC is riding out single market decline with a diversified portfolio

2024 has already proved to be a challenging year for the renewable energy infrastructure sector, with even the largest funds trading at significant discounts. This has been felt most acutely in the energy storage segment, where Great Britain’s (GB) expanding battery capacity has increased market saturation and caused revenues from ancillary services to fall to historic lows. Despite efforts to increase bulk dispatch of batteries into the Balancing Mechanism, in-merit systems remain largely untapped while wholesale trading has yet to fill the gaps left in declining revenue stacks.

The impact on energy storage funds has been stark, with GB-focused trusts bearing the brunt of these changing market dynamics. The situation has, however, confirmed more than ever the value of a diversified strategy, which Gore Street Capital (GSC) has enacted since 2019.

This uniquely resilient and differentiated approach first took GSC to the Irish grid, where today it manages three operational systems that have proved to be some of the most consistent and lucrative assets in the managed portfolio. Expansion into Germany and Texas in early 2022 provided access to a broader range of revenue streams while completion of the 200 MW/400 MWh Big Rock project in California will deliver highly contracted revenue over several years.

The portfolio’s composition across five uncorrelated markets has proven itself to deliver market-leading revenues while drastically reducing exposure to the prevailing conditions in any single market.

The ongoing situation in GB illustrates the dangers of a singular approach, with the market delivering average estimated revenue of £6.1/MW/hr in the three months to December 2023-end against the £15.1/MW/hr generated by the entire portfolio under GSC’s management. This same total average was reached over the previous six months, displaying the stable revenue profile achieved by a balanced portfolio delivering seasonal revenues from complimentary markets.

GSC’s assets under management are able to achieve long-term sustainable growth and consistent dividend payments for its client’s investors through this structure, which is helped further by responsible management of capital expenditure and operating costs. The in-house technical team is focused on the lowest cost per MW when progressing construction of more than 400 MW of new capacity due online by the end of 2024. These assets have been designed appropriately for the opportunities available in each market to ensure spending is kept to a minimum while delivering high-quality assets.

The build-out of new capacity in Texas and California will take GSC’s US assets under management to 55% of total operational MWh while GB will represent less than 30%, even with new capacity additions.

We have been saddened to see the decline of GB’s energy storage market, which was once world-leading in scale and opportunity. But GSC has long anticipated this change and has spent the years since acquisition of its first energy storage system in 2016 steadily growing its reach to new markets around the world. This foresight has prepared the company and its client for the current turbulence in GB and ensured both are well-positioned to continue leading the energy storage market into the future.