Battery storage is increasingly recognised as a critical enabling technology for the global energy transition. Intermittent renewable generation — wind when the wind blows, solar when the sun shines — requires large-scale storage to balance supply and demand on electricity grids. Without storage, high levels of renewable penetration create grid instability: too much electricity when generation is high, not enough when it is low. Battery systems solve this by charging when power is cheap or abundant and discharging when it is scarce or expensive.
As renewable capacity builds rapidly worldwide, the market for grid-scale battery energy storage systems (BESS) has grown from negligible to substantial in less than a decade. The International Energy Agency estimates that annual BESS installations more than tripled between 2020 and 2024, and the trajectory of growth continues steeply upward.
How Grid-Scale Battery Storage Works
A grid-scale BESS consists of lithium-ion battery cells (the same chemistry as in electric vehicles, though typically in large containerised packs) connected to power electronics that convert direct current from the batteries to alternating current for the grid. Systems range from 1 MW/1 MWh (small commercial or community scale) to multi-gigawatt hour installations covering hundreds of acres.
Revenue comes from several sources, which vary by market:
Balancing services (frequency response): National Grid and similar system operators pay for rapid-response services that maintain grid frequency within narrow tolerances. When frequency drops (too much demand, not enough supply), batteries can inject power within milliseconds — far faster than any other technology. Products include Dynamic Containment, Dynamic Moderation, and Dynamic Regulation in the UK market.
Capacity market payments: government-backed contracts for providing available capacity during peak demand periods. UK capacity market contracts last 1–15 years and provide revenue certainty.
Merchant trading / price arbitrage: buying electricity when prices are low (typically at night or during high wind periods) and selling when prices are high (morning and evening peaks). Revenue depends on price spreads, which vary with market conditions.
Constraint management: in some grid locations, batteries are paid to absorb or release power to manage network congestion.
Listed UK Battery Storage Investment Trusts
The UK has produced a cluster of listed investment trusts focused on grid-scale battery storage — a sector that does not exist in comparable listed form in most other markets.
Gresham House Energy Storage Fund (GRID — LSE): the largest UK-listed battery storage trust, with a portfolio of grid-scale BESS assets across the UK. Revenue comes primarily from UK balancing services and capacity market contracts.
Gore Street Energy Storage Fund (GSF — LSE): diversified internationally, with assets in the UK, Ireland, Germany, and the United States. Slightly different risk profile to GRID given geographic diversification.
Harmony Energy Income Trust (HEIT — LSE): focused on two-hour duration BESS, which are better suited to capturing higher wholesale price spreads than shorter-duration (30-minute) systems.
All three trusts experienced significant share price declines in 2022–2024, falling to discounts of 30–50% to stated NAV. The causes were complex: rising discount rates affected valuations of all long-duration income assets, but the battery trusts faced additional headwinds as balancing services revenues compressed sharply.
The balancing services compression issue. Dynamic Containment and similar balancing products launched in the UK in 2020–2021 offered high revenues initially because the installed battery base was small relative to the National Grid's procurement requirements. As more BESS capacity came online — driven by those attractive revenues — the market became more competitive and clearing prices fell significantly. Some trusts had projected forward revenues based on early-period rates that proved unsustainable.
This dynamic illustrates a recurring challenge in early-stage infrastructure markets: first-mover revenues can be high, attracting capital that saturates the market and compresses returns.
Battery Technology: Lithium-Ion and Beyond
Lithium Iron Phosphate (LFP) has become the dominant cell chemistry for grid-scale storage, replacing the NMC (nickel-manganese-cobalt) chemistry more common in EV batteries. LFP has lower energy density (less important for stationary storage than for vehicles) but better cycle life, safety, and lower cost.
Flow batteries (vanadium redox flow, iron-air) offer longer duration storage (4–12 hours) at lower cost per kWh for large systems but have not yet achieved the cost competitiveness of lithium-ion at shorter durations.
Sodium-ion batteries are a potentially disruptive technology — sodium is far more abundant than lithium — with CATL and others moving towards commercialisation. Cost and energy density are not yet competitive with LFP for most applications.
Form Energy's iron-air battery claims to offer 100-hour storage at very low cost (targeted at seasonal storage), a potentially transformational technology if commercialisation is achieved.
The EV Battery Intersection
The same battery factories that supply electric vehicles also supply grid storage. The extraordinary scale of EV manufacturing investment — from CATL and BYD in China to planned gigafactories in Europe and North America — is driving rapid cost deflation. Bloomberg New Energy Finance tracked lithium-ion battery pack costs falling from approximately $1,200/kWh in 2010 to below $150/kWh by 2024.
Further cost reductions are expected as manufacturing scales, energy density improves, and raw material supply chains mature. Lower battery costs make storage more economically competitive across a wider range of applications.
Critical minerals. Battery storage shares its supply chain vulnerabilities with EVs: lithium (primarily from Australia and Chile), cobalt (primarily from the Democratic Republic of Congo), nickel, and manganese are all essential. The diversification of supply and the development of LFP (which uses iron instead of cobalt) partially address this, but critical mineral security remains a strategic concern for governments and investors.
Manufacturers and Value Chain
CATL (Contemporary Amperex Technology, 300750 — Shenzhen Stock Exchange): the world's largest battery manufacturer, supplying both EVs and grid storage globally. Not easily accessible for most UK retail investors through standard accounts without a China A-shares capability.
BYD (1211 — Hong Kong Stock Exchange): battery manufacturer, EV maker, and grid storage supplier. Accessible through Hong Kong-listed equities.
Tesla (TSLA — NASDAQ): its Megapack product is a major grid-scale BESS platform. Tesla Energy revenues have grown significantly.
Fluence Energy (FLNC — NASDAQ): originally formed as a Siemens-AES joint venture and now publicly listed (with Siemens and AES retaining significant stakes), focused purely on grid storage integration and software. US-listed and accessible to international investors.
Power electronics and inverter manufacturers: companies such as Sungrow (SZ:300274), Huawei Digital Power, and SMA Solar Technology supply the inverters essential for BESS systems.
ETF Exposure
L&G Battery Value-Chain UCITS ETF (BATT — London-listed): covers the battery value chain from miners to cell manufacturers to energy storage integrators.
iShares Global Clean Energy UCITS ETF (INRG — London-listed): broader clean energy including storage exposure.
Invesco Solar Energy UCITS ETF (RAYS): indirect exposure as solar growth drives storage co-location.
Risks
Revenue compression. Balancing services markets can become oversupplied quickly as new capacity enters. UK battery trusts learned this the hard way in 2022–2024.
Policy and market design. Revenue models depend on regulatory frameworks (capacity markets, balancing services rules) that can change. The energy market is heavily regulated and politically sensitive.
Technology obsolescence. Rapid cell technology development means that existing assets could face lower-cost competitors within the asset's useful life.
Discount rate sensitivity. Long-duration income assets are sensitive to the interest rate environment.
Chinese supply chain risk. The dominance of Chinese manufacturers in battery production creates concentration risk and potential geopolitical trade disruption.
The value of investments can fall as well as rise. Infrastructure investment trusts can trade at significant discounts to NAV. Past performance is not a reliable guide to future results. This guide is for informational purposes only. Always seek professional advice.
How Global Investments Can Help
Battery storage is a genuinely critical infrastructure sector for the energy transition, but the listed investment trust market has demonstrated the importance of understanding revenue model risks and valuation entry points. Our alternatives team can help you assess whether existing discounts represent opportunity or rational pricing of fundamental risks, and integrate storage exposure within a broader clean energy or infrastructure allocation. Contact us to explore the sector.
This guide is for general information only and does not constitute financial advice or a personal recommendation. The value of investments can fall as well as rise and you may get back less than you invest. Past performance is not a guide to future returns. Tax rules, investment regulations, and the availability of specific investment vehicles change — always verify current rules and seek advice from a qualified independent financial adviser before making any investment decisions.