Energy storage and AI attract investors in the energy transition

Pinsent Masons and Censuswide asked almost 1,000 VC investors and technology developers to share their sentiment towards low‑carbon technology to identify global low carbon energy investment trends. The study identified their clear focus on carbon capture and storage (CCS) and their planned pivot towards renewable energy generation over the year ahead, but it also highlighted investors’ significant interest in energy system optimisation.

More than half of those surveyed, 54%, said they had invested in short and long duration energy storage over the past year, or planned to do so within the next 12 months.

Energy storage solutions are becoming increasingly important to national energy systems globally.

Short duration energy storage is primarily used for real-time balancing of electricity grids. Lithium‑ion batteries, flywheels and supercapacitors can typically discharge energy for between four and 10 hours. The energy they store can be discharged quickly.

Longer duration energy storage is particularly important for capturing excess energy generated from, for example, wind or solar farms, so that that energy is not wasted if it is not needed and used immediately. These systems can also be a dependable source of electricity during power outages or when extreme weather hits. While energy from long duration storage can be discharged over long periods, those systems generally take longer to operationalise and so are used more to address anticipated peaks in demand or shortages in supply than for real-time system balancing.

In addition to energy storage, 49% of VC investors and technology developers surveyed in the Pinsent Masons study said they had invested in or plan to invest in using AI to manage power demand. Almost every respondent to the survey said they believe the effectiveness of AI used in grid optimisation and other emission-lowering projects outweighs the emissions cost required to support it, in powering and cooling those AI systems – 61% strongly agreed with that statement, while 36% said they somewhat agreed.

Peter Feehan of Pinsent Masons, who specialises in cleantech and renewable energy projects, said: “All European nations are struggling with keeping up with the upgrades required to support the energy transition. European and Middle Eastern geopolitical issues have also demonstrated the need for greater sovereign energy resilience, coupled with the intermittent nature of renewables, the need to optimise and make best use of the network capacity we have has never been greater.”

“Making better use of what capacity we have in Europe will allow some elevation of the lack of capacity at transmission and demand, until the same can be delivered. AI and future prediction has to be the way forward, but governments need to continue to commit to short and long duration storage arrangements to make the market fundable and underpin the much-needed investment in European networks,” he said.

Nuclear power has an important role in underpinning the energy transition at a time when additional demands are being placed on electricity grids globally, according to Michael Freeman, an expert in nuclear projects and regulation at Pinsent Masons.

“Nuclear power is, in many respects, the perfect partner for energy-intensive industry,” Freeman said. “Demands on the grid are increasing as a result in particular of huge advances in AI and data capacity; net zero targets remain; and the need for domestic energy security is increasing in prominence and urgency in light of geopolitical uncertainty and conflict. Nuclear power, and in particular that which could be provided by Small Modular Reactors (SMRs) and other advanced nuclear technologies, would tackle these complexities head-on by providing clean, low carbon and continuous baseload power.”

“The risk profile presented by SMRs and emerging nuclear technologies is lower than conventional gigawatt-scale nuclear plants, and the commercial and economic profile of SMR development supports the principle of co-locating SMRs with energy-intensive industry, potentially even on a private wire basis. The pathway to reality is not, however, straightforward: these are as-yet ‘first of a kind’ projects which present significant regulatory hurdles, notably those in a siting and consenting context, and which require careful consideration when looking initially at project risk and schedule,” he said.