Investments aligned with this Strategic Goal aim to improve energy storage technologies and infrastructure to support the global transition to clean energy.

The sections below include an overview of the approach for achieving desired goals, supporting evidence, core metrics that help measure performance toward goals, and a curated list of resources to support collecting, reporting on, and using data for decision-making.

What

Dimensions of Impact: WHAT

Investors interested in deploying this strategy should consider the scale of the addressable problem, what positive outcomes might be, and how important the change would be to the people (or planet) experiencing it.

Key questions in this dimension include:

What problem does the investment aim to address? For the target stakeholders experiencing the problem, how important is this change?

Keeping global warming below 1.5°C will require cutting greenhouse gas emissions in half within the next nine years (1). Accordingly, many countries have pledged to reach net zero emissions over the next few decades (2). For instance, the Biden administration aims for the United States to achieve net-zero emissions by 2050, while China is aiming for 2060 (3,4). New Zealand and some European nations already have net zero commitments written into law (5).

One major problem hindering the successful transition to 100% clean energy is the intermittency of variable renewable energy sources, like wind and solar power, that naturally fluctuate. Since they are not always readily available, the timing of this renewable energy production is not balanced with peak electricity demand (6). For example, electricity demand generally peaks during the evening, when solar power production falls. Utilities relying on solar energy must then rapidly ramp up other forms of generation after sunset (7). Additionally, during the day, when demand is low but production is high, system operators often curtail renewable energy generation to avoid overloading the system, which reduces the environmental and economic benefits of clean energy generation.

Energy storage systems can alleviate the intermittency of renewable energy sources by releasing stored power when clean energy inputs like wind and solar are not available (8). Key grid energy storage technologies include batteries, pumped hydroelectric, compressed air, thermal storage, hydrogen, and flywheels (9).

Another hindrance to the 100% transition to clean energy is the reliance on liquid fuel for various modes of transportation and industrial processes. Though many clean energy sources can generate electricity, battery performance is typically insufficient to power heavy-duty engines (10). Even as annual sales of electric cars top 2.1 million globally, the maximum achievable battery capacity still rapidly decreases past a certain threshold charge or discharge rate (11,12). Investments in battery technology to enhance the practical application of batteries for heavy vehicles like trucks, tractors, and cargo ships will be necessary to transition the transportation sector away from carbon-intensive fuels.

Investments in technology enhancements to improve batteries and other forms of storage infrastructure can:

  • unlock new battery chemistries through innovative materials;
    develop battery technologies with greater discharge rate (for heavy-duty engines), greater capacity (for longer range in transportation), and faster recharge;
  • advance hydrogen fuel-cell technology for onboard storage in electric vehicles (especially heavy-duty vehicles);
  • design and build large-scale infrastructure, such as pumped hydroelectric and compressed air storage, featuring high capacity and long discharge times;
  • support small-scale infrastructure, such as batteries and flywheels, that enable fast discharge at low capacity;
  • enable utility-scale battery storage where pumped hydroelectric storage is environmentally or geologically constrained; and
  • facilitate upgrades to grid infrastructure, for example through grid analytics and software or improvements in transmission lines, to enable utility-scale storage, especially in rural or isolated areas.

What is the scale of the problem?

According to the International Energy Agency the world will need 50 times the size of the current energy storage market by 2040, a total of approximately 10,000 GWh annually stored in batteries and other means, in order to meet the increasing energy demands of the world’s growing population through sustainable sources (13). However, current energy-storage technologies will fall short of these needs as a result of their shortcomings in both deployment and performance (14). In fact, global grid-scale storage installations dropped by 20% in 2019, signaling the fragility of this market and its heavy reliance on policy interventions (15).

Who

Dimensions of Impact: WHO

Investors interested in deploying this strategy should consider whom they want to target, as almost every strategy has a host of potential beneficiaries. While some investors may target women of color living in a particular rural area, others may set targets more broadly, e.g., women. Investors interested in targeting particular populations should focus on strategies that have been shown to benefit those populations.

Key questions in this dimension include:

Who (people, planet, or both) is helped through investments aligned with this Strategic Goal?

Specific target stakeholders of this Strategic Goal include the following.

Planet: Energy storage technologies enable the use of a larger fraction of available renewable energy production, improving its potential to reduce greenhouse gas emissions by addressing a problem called curtailment. For instance, in California, adding 60 GW of renewable energy generation without energy storage can reduce CO2 emissions by 72% compared to non-renewable generation of 60 GW. With improved clean energy storage systems, however, CO2 emissions could be reduced as much as 90% (16).

Rural, isolated grid, and off-grid communities: Batteries paired with renewable generators can benefit rural or off-grid communities that typically generate electricity with expensive, imported diesel. Energy storage provides these communities with cheaper, more reliable electricity that eliminates or reduces their dependency on fossil fuels (17). In developing economies, where rural communities may not have daily access to electricity, storage technologies help combat energy poverty (18).

Low- and middle-income communities: Storage technologies can improve electricity access and affordability for vulnerable communities, which are most likely to face adverse impacts from power outages, including those caused by extreme weather events. (In some geographies, these vulnerable communities are communities of color.) Storage can make electricity supply more reliable, especially for critical facilities and emergency services (19). Renewable energy paired with storage technology can also increase energy affordability; for instance, a recent solar-plus-storage installation in New York is expected to reduce electricity rates by 10% (20).

Megacities: Residents of developing world megacities—where air pollution poses a critical health risk—benefit from the development of higher-capacity, lighter-weight batteries, which would enable the more widespread deployment of electric vehicles in these cities, including both personal automobiles and public transit. Greater battery capacity would allow the electrification of heavy-duty vehicles and increase the range of electric transport (21). Battery technology an also support local power systems, reducing or eliminating the need to generate electricity using fossil fuels within megacities (22).

Communities dependent on legacy industry: Investments in storage infrastructure can assist communities that are today economically dependent on fossil fuels and manufacturing for employment opportunities. In New York alone, the energy storage industry could support up to 27,400 new jobs, particularly in manufacturing (23). The transition away from fossil fuel production and emissive industrial practices, coupled with the rise in automation, will likely cause job losses in legacy industries. Employment opportunities in storage can facilitate a just transition that ensures these communities are not left behind.

System operators: Utility-scale battery storage systems can help regulate grid frequencies, allow for flexible ramping, and even out imbalances between power supply and demand. During grid failures, operators can use large-scale battery storage systems to “black start” power-generation services (starting power generation without initial system power from the grid) in lieu of diesel generators. Moreover, storage systems can hold back power to avoid network congestion during peak generating hours and reduce energy costs by smoothing out demand peaks, which is known as peak shaving (24). Stored energy facilitates grid operators’ ability to transition to clean energy, which is critical to reducing their dependence on fossil fuels and achieving global emissions-reduction targets.

Renewable energy producers: Reducing variability through energy-storage systems helps to mitigate the uncertainties that characterize many renewable energy sources. This makes renewable energy more competitive in market-based auctions for energy or capacity because it ensures its 24-hour availability (25). As countries consider slowly phasing out subsidies for renewable energy, storage infrastructure will bolster the commercial viability of clean energy, encouraging an increase in the percentage of renewables in the energy mix.

What are the geographic attributes of those who are affected?

The impacts of improved energy storage are not limited to any geographic area, but immediate use and adoption directly benefits countries transitioning to clean energy. By 2050, the International Renewable Energy Agency (IRENA) suggests, renewables can constitute more than 60% of many countries’ total final energy consumption (26). Energy storage promotes that transition. Notable countries engaging in the development of energy storage technology include the United States, China, Korea, Japan, Australia, and numerous European countries, including Germany, France, Italy, and the United Kingdom (27).

Large-scale battery storage is not currently widely deployed in developing countries. Sub-Saharan Africa in particular has almost 600 million people without access to affordable and reliable energy despite the African continent’s potential for wind and solar (28). Thus, energy storage not only stabilizes and strengthens electricity grids but could also transform the clean energy landscape in developing countries.

Contribution

Dimensions of Impact: CONTRIBUTION

Investors considering investing in a company or portfolio aligned with this strategy should consider whether the effect they want to have compares to what is likely to happen anyway. Is the investment's contribution ‘likely better’ or ‘likely worse’ than what is likely to occur anyway across What, How much and Who?

Key questions in this dimension include:

How can investments in line with this Strategic Goal contribute to outcomes, and are these investments’ effects likely better, worse, or neutral than what would happen otherwise

Organizations can consider contribution at two levels—enterprise and investor. At the enterprise level, contribution is “the extent to which the enterprise contributed to an outcome by considering what would have otherwise happened in absence of their activities (i.e., a counterfactual scenario).” To learn more about methods for assessing counterfactuals, see the Impact Management Project.

Investments in improving clean energy storage technology can contribute as follows:

  • Signal that impact matters: By investing in storage technologies and infrastructure, investors demonstrate that storage infrastructure will be critical to increasing the percentage of renewables in the energy mix and realizing global emissions targets. Further, they signal confidence that the intermittency issues commonly cited as drawbacks to clean energy sources can be resolved with scalable solutions.
  • Engage actively: Investors can promote and demand utility-scale storage infrastructure to reduce utilities’ dependence on peaker plants. Beyond operators and energy providers, investors can advocate policymakers to design incentives for solar-plus-storage or battery-storage facilities in commercial and residential built environments. Similarly, they can encourage companies, especially small and medium-sized enterprises, to invest in onsite generation and storage of clean energy. Investors can also leverage their global knowledge and networks to accelerate the adoption of best practices in the clean-energy transition.
  • Grow new or undersupplied markets: Investors willing to provide patient capital can support the decades-long project to transform both centralized (grid-level) and distributed energy storage to enable widespread, affordable adoption of clean energy. Energy is a key limiting input for the growth of small and medium-sized enterprises (SMEs), especially in rural and isolated communities. By scaling and improving storage or perhaps by financing localized storage installations, investors can spur broad SME growth through improved energy availability and reduced costs. Distributed energy storage also distributes the associated economic opportunity, potentially extending the benefits of the low-carbon transition to regions seeking pathways to economic development.
  • Provide flexible capital: Companies developing storage technologies are often early- stage and high-risk. With high costs for research and development and upfront installation, investors that can provide flexible capital, including blended finance, can support proof-of-concept product development.

Holding the rise in global temperature below 1.5°C above pre-industrial levels, as recommended by the IPCC’s Special Report on Global Warming, will require a transition towards clean energy that cannot be achieved without energy storage (34).

How Much

Dimensions of Impact: HOW MUCH

Investors deploying capital into investments aligned with this strategy should think about how significant the investment's effect might be. What is likely to be the change's breadth, depth, and duration?

Key questions in this dimension include:

How many target stakeholders can experience the outcome through investments aligned with this Strategic Goal?

Because electricity is globally consumed and energy storage systems are designed to integrate with grid systems or transportation infrastructure, investments in this Strategic Goal can impact almost everyone and all energy sectors. For reference of scale in the grid-related sector, the United Kingdom alone curtailed over 3.6 TWh of wind energy (on 75% of days) in 2020, enough to power more than one million homes for an entire year—had it been stored for later usage (29). In China, some regions, particularly the sparsely-populated northern and western provinces, have seen curtailment rates as high as 33% (30). In Yunnan province, curtailed hydropower alone was about 31.2 TWh in 2016, over 10% of the province’s total power generation and more than enough to meet the residential electricity needs of its population of 48 million (31).

How much change can target stakeholders experience through investments aligned with this Strategic Goal?

Estimates suggest that in China, for instance, efficient utilization of curtailed energy could reduce annual CO2 emissions by about 250 million metric tons and reduce annual particle pollution by 0.11 million metric tons (32). The exact amount of change effected by storage systems will depend on the installed location’s policy and policy stability around the transition to 100% clean energy, existing grid infrastructure, and access to clean energy sources. Effective integration with grid infrastructure requires standardized energy storage interconnections (33).

Risk

Dimensions of Impact: RISK

Key questions in this dimension include:

What impact risks do investments aligned with this Strategic Goal run? How can investments mitigate them?

  • Unexpected Impact Risk: The battery-manufacturing process can have detrimental impacts on environment and human health. In addition to land degradation caused by the mining and extraction of the rare earth metals used in batteries, the process requires much energy to create the required high heat and sterile conditions. Toxic chemicals from mining sites are likely to leak into water supplies and local ecosystems (35). Investors can mitigate this risk by comprehensively assessing potential environmental impacts on mining sites and nearby local communities and by increasing energy efficiency in the mining and refining processes, as well as in battery cell manufacturing and pack assembly. Investors should also ensure the implementation of appropriate end-of-life battery recycling and overall proper cradle-to-grave management (36).

    Lithium-ion batteries, the dominant technology for electric vehicles, are highly flammable, and the risk of their flammability increases with battery size. Investors can mitigate this risk by ensuring that thermal management and other engineering solutions are explored and integrated in the manufacturing process (37).

    Finally, investments in any clean energy–enabling infrastructure, by reducing reliance on fossil fuels for electricity generation, can cause significant worker displacement. New ‘green’ jobs may not arise in the same location or at the same pace as those lost (38). Closing power plants leads to unemployment not only among their direct employees but also among those who provide services or goods to plant workers. Investors can mitigate this risk by engaging with key stakeholders to push for a just transition, including integrating values and goals around a just transition into their internal human capital management processes and external searches for consultants, advisors, and managers, as well as encouraging consideration of justice-related concerns in their interactions with other stakeholders and in the operational decisions of their portfolio companies.

  • Stakeholder Participation Risk: Grid-scale deployment of battery storage may face slow uptake due to market, policy, and regulatory uncertainty. Regulatory uncertainty includes uncertainty regarding which regulations apply, which may be challenging as deployment increases in scale (39). To mitigate this risk, investors may consider cross-referencing similar, more established policies, systems, and regulations in other countries or regions.

Illustrative Investment

Gresham House established the Gresham House Energy Storage Fund (GRID) to invest in a portfolio of utility-scale battery energy storage systems (BESS) in Great Britain (40). In 2019, GRID had a total capacity of 174 MW in its BESS fleet, with total energy discharge of 31,767 MWh sufficient to serve 8,878 homes (equivalent to approximately 11,785 metric tons of avoided CO2 emissions). As of 2020, GRID doubled its cumulative BESS capacity to 315 MW, with a greatly increased total energy discharge of 170,000 MWh sufficient to serve 47,000 homes (equivalent to avoided CO2 emissions of approximately 63,000 metric tons). Since its initial public offering, GRID’s portfolio has avoided more than 82,000 metric tons of CO2 emissions (41).

Gore Street Capital established the Gore Street Energy Storage Fund (GSF) to invest in a diversified portfolio of fully developed, utility-scale energy storage projects primarily located in the United Kingdom and Ireland (although the company will consider projects in North America and Western Europe) (42). GSF invests in lithium-ion batteries that have up to 15 years’ warranty from its suppliers, although the fund is open to investing in any battery technology (43). As of 2020, GSF has four operational assets, two pre-construction activities, and two assets under construction. In its 2020 fiscal year, Gore Street exported a total of 3000 MWh of electricity to the grid and saved consumers approximately 400 MWh during the winter-season period of peak system demand (44).

Draw on Evidence

This mapped evidence shows what outcomes and impacts this strategy can have, based on academic and field research.

NESTA: 3
Using Battery Storage for Peak Shaving and Frequency Regulation: Joint Optimization for Superlinear Gains

Shi, Yuanyuan, Bolun Xu, Di Wang, and Baosen Zhang. “Using Battery Storage for Peak Shaving and Frequency Regulation: Joint Optimization for Superlinear Gains.” IEEE Transactions on Power Systems 33, no. 3 (2017): 2882-2894.

NESTA: 3
Massive energy storage systems enable secure electricity supply from renewables

Sangster, Alan J. “Massive energy storage systems enable secure electricity supply from renewables.” Journal of Modern Power Systems and Clean Energy 4 (2016): 659-667.

NESTA: 3
Role of energy storage systems in energy transition from fossil fuels to renewables

Kalair, Anam, Naeem Abas, Muhammad Shoaib Saleem, Ali Raza Kalair, and Nasrullah Khan. “Role of energy storage systems in energy transition from fossil fuels to renewables.” Enery Storage 3, no. 1 (2020): 1-27.

NESTA: 2
Energy Storage for Peak Shaving in a Microgrid in the Context of Brazilian Time-of-Use Rate

Salles, Rafael S., A.C. Zambroni de Souza, and Paulo F. Ribeiro. “Energy Storage for Peak Shaving in a Microgrid in the Context of Brazilian Time-of-Use Rate.” Proceedings 58, no. 1 (2020): 16.

NESTA: 3
The role of energy storage in deep decarbonization of electricity production

Arbabzadeh, Maryam, Rambteen Sioshansi, Jeremiah X. Johnson, and Gregory A. Keoleian. “The role of energy storage in deep decarbonization of electricity production.” Nature Communications 10, no. 3413 (2019).

NESTA: 3
Environmental Impacts of Utility-Scale Battery Storage in California

Balakrishnan, A., Brutsch, E., Jamis, A., Reyes, W., Strutner, M., Sinha, P., & Geyer, R. (2019, June). Environmental Impacts of Utility-Scale Battery Storage in California. In 2019 IEEE 46th Photovoltaic Specialists Conference (PVSC) (pp. 2472-2474). IEEE.

NESTA: 3
A Framework for Evaluating the Resilience Contribution of Solar PV and Battery Storage on the Grid

Phillips, T., McJunkin, T., Rieger, C., Gardner, J., & Mehrpouyan, H. (2020, October). A Framework for Evaluating the Resilience Contribution of Solar PV and Battery Storage on the Grid. In 2020 Resilience Week (RWS) (pp. 133-139). IEEE.

NESTA: 3
Optimal Allocation of PV Generation and Battery Storage for Enhanced Resilience

Zhang, B., Dehghanian, P., & Kezunovic, M. (2017). Optimal allocation of PV generation and battery storage for enhanced resilience. IEEE Transactions on Smart Grid, 10(1), 535-545.

NESTA: 3
Lowering greenhouse gas emissions in the built environment by combining ground source heat pumps, photovoltaics and battery storage

Litjens, G. B. M. A., Worrell, E., & Van Sark, W. G. J. H. M. (2018). Lowering greenhouse gas emissions in the built environment by combining ground source heat pumps, photovoltaics and battery storage. Energy and Buildings, 180, 51-71.

NESTA: 2
Research gaps in environmental life cycle assessments of lithium ion batteries for grid-scale stationary energy storage systems: End-of-life options and other issues

Pellow, M. A., Ambrose, H., Mulvaney, D., Betita, R., & Shaw, S. (2020). Research gaps in environmental life cycle assessments of lithium ion batteries for grid-scale stationary energy storage systems: End-of-life options and other issues. Sustainable Materials and Technologies, 23, e00120.

NESTA: 2
The Life Cycle Energy Consumption and Greenhouse Gas Emissions from Lithium-Ion Batteries

Romare, M., & Dahllöf, L. (2017). The life cycle energy consumption and greenhouse gas emissions from lithium-ion batteries.

Each resource is assigned a rating of rigor according to the NESTA Standards of Evidence.

Define Metrics

Core Metrics

This starter set of core metrics — chosen from the IRIS catalog with the input of impact investors who work in this area — indicate performance toward objectives within this strategy. They can help with setting targets, tracking performance, and managing toward success.

Interested in providing feedback on these IRIS metrics in the forthcoming public comment period? Request an invitation here and include “Clean Energy theme” in the box.

Additional Metrics

While the above core metrics provide a starter set of measurements that can show outcomes of a portfolio targeted toward this goal, the additional metrics below — or others from the IRIS catalog — can provide more nuance and depth to understanding your impact.