Japan’s emerging large-scale grid energy storage market now has its first-ever dedicated investment fund, co-managed by Gore Street Capital, which launched the UK-based Gore Street Energy Storage Fund in 2018.
Gore Street announced today (December 4) that it has been selected to manage the new fund, along with Japanese entrepreneur Itochu.
It is a public-private partnership initiated by the Tokyo Metropolitan Government (TMG), with the pair selected and appointed through competitive bidding. Both parties will be responsible for the fund's technical and economic decisions.
TMG will provide an initial investment of 2 billion yen ($13.63 million). Itochu will also provide funding and is seeking participation from other private investors. Investment will focus on projects in the Kanto region, which includes Tokyo and six surrounding prefectures.
Gore Street said a large part of the new investment fund's mandate will be to establish a new "green financing model" in Japan for investing in large-scale battery energy storage system (BESS) assets.
Its partner Itochu is active in multiple fields, including raw materials, machinery, metals, fashion labels, real estate, food, insurance and financial services to energy, and has sold approximately 55,000 home battery energy storage systems in Japan as of the beginning of this year. One of the market leaders.
Itochu has entered the large-scale BESS field. In June this year, the company announced the launch of its first 11MW/23MWh project in Osaka Prefecture in western Japan, in partnership with Osaka Gas. The company has also partnered with Australian developer Akaysha Energy to announce a large-scale BESS project in Japan last September.
The fundamental need for energy storage in Japan
Japan, like the UK, is an island nation relatively unconnected to its neighbours. This means it needs to balance and manage fluctuations within its own grid network, and energy storage is a key technology to achieve this, especially as such fluctuations will increase as the share of renewable energy increases.
Like the UK, Japan sees the de-monopoly of the electricity market as an important means of achieving greater competition in supply and services. However, unlike the UK, energy storage has yet to take off in Japan.
This is partly because historically Japan's power sector has been a series of local monopolies managed by powerful power generation companies that own and operate the grids in their respective regions. There are a variety of competitive market opportunities in the UK for ancillary services such as frequency response.
Japan's efforts to de-monopolize markets and eliminate these monopolies are still in their early stages. Meanwhile, efforts over the past year or so to create a favorable market for energy storage have gained significant momentum but are still in their relatively early stages.
Barriers are being removed
Rystad Energy analyst Chris Wilkinson wrote earlier this year in our quarterly magazine PV Tech Power (Volume 34) that Japan needs a "fully developed" BESS industry so that developers can "avoid reductions, capture revenue and further Promote the development of not only solar energy but all renewable energy sources”.
As Itochu's involvement in the space, and similar moves by other major players in Japan's corporate world such as financial services group Orix and oil company Idemitsu, suggest, the market is gradually evolving. Technology providers NGK, Sumitomo Electric, CATL and Gotion have also participated in recent market entries or expansions.
Last year, Japan enacted regulations to enable energy storage to participate in bulk energy trading through the spot market of the JEPX power exchange, providing a potential revenue opportunity for BESS and leading to solar developer Pacifico Energy's launch of operations on JEPX in mid-2023. First BESS unit.
Meanwhile, the ancillary services market - which opened up access to the UK market for Gore Street and other companies in 2016 - is due to launch next year.
The government has also launched a funding scheme to provide around $100 million in initial funding to directly support battery storage projects over 10MW, covering up to half of their construction costs, along with a new carbon-neutral power supply capacity market , enabling BESS with a duration of more than 3 hours to participate and obtain a 20-year contract.
Gore Street has one of the most widely distributed BESS portfolios in the world. The company has approximately 1GW of operating assets in the UK and also has assets in the ERCOT markets in Ireland, Germany and Texas, as well as a 200MW/400MWh asset under construction in the CAISO market in California.
Gore Street CEO Alex O’Cinneide recently told the specialist podcast Redefining Energy that the Gore Street Energy Storage Fund’s assets have earned an average of around £19 ($24) per megawatt hour (MW) over the past year. O’Cinneide said higher revenues could be achieved by investing in different markets, with the UK market averaging around £6 per MWh over the same period.
O'Cinneide, who this year was chosen by the jury for the Outstanding Contribution Award at the Energy Storage Awards hosted by our publisher Solar Media, said in a statement today that he will be awarded the new Tokyo Metropolitan Government Fund. , this international experience and foundation as an early player in the UK market will be an advantage.
"We have developed a specialized platform that provides all the technical expertise required to successfully monetize energy storage assets throughout their life cycle, from acquisition and construction, asset management and commercialization, all the way to decommissioning and recycling," Chief executive said.
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