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Smart energy revolution contains opportunities for lenders and investors, says expert

Out-Law Analysis | 04 Oct 2017 | 11:00 am | 1 min. read

ANALYSIS: Traditional lenders and a broad range of investors have an opportunity to realise significant returns by supporting the smart energy revolution.

Many businesses active in the energy sector are looking to develop or acquire technologies such as smart meter systems, data analytics and management services, mobile applications, battery storage technology and vehicle-to-grid technology.

This is part of our series analysing the challenges and opportunities ahead for companies embracing smart energy technologies. For more, sign up to receive an exclusive Pinsent Masons research paper on smart energy technology, supply, storage and investment.

Many of the most innovative solutions are being developed by technology start-ups.

While these companies often lack the capital, networks, resources and infrastructure to grow their business ideas on their own, there are opportunities for energy utilities and a broad range of investors to work in partnership with the start-ups to their mutual benefit.

A new report by Pinsent Masons, the law firm behind Out-Law.com, has highlighted the increasing level of interest in smart energy technologies among both utilities and investors, such as private equity houses, investment banks, multilateral development banks and sovereign wealth funds.

All these lenders and investors, as well as pension funds and smaller scale infrastructure funds too, can play in role in the smart energy technology market as it evolves through innovation.

We have already seen appetite for this in the UK over the last few years in the sphere of energy efficiency technology.

A number of investors have moved into that field, with many taking advantage of tax reliefs on offer through the government's Enterprise Investment Scheme (EIS).

Investment in energy efficient technologies has delivered benefit in the areas of social housing, manufacturing and university accommodation, among other examples. In those cases investors saw that there were stable and reliable returns available from investing in smart technologies like LED lighting or rooftop solar panelling.

For the trend of investment in the smart energy technology market to continue, investors need to see potential in both the technologies themselves and in the projects in which the technologies are to be used.

Investors will need to be confident that the technology they are investing in is going to be durable and not quickly become obsolete.

It is also vital that the supplier of the technology has a strong financial covenant.

One of the other important things that investors will look for is long-term, stable revenue. Where possible, smart energy technology innovators should consider putting in long term offtake agreements to demonstrate future income and help attract investment.

All of those things need to be in place before we can see investment in the smart technology sector move on to the next level.