Battery storage demand stirs ArcLight Capital’s investment in Elevate Renewables

'Given the nature of this portfolio, and the synergies that are created, we are expecting mid- to high-teens rates of return from this portfolio,' said Angelo Acconcia, partner at ArcLight Capital.

Growing demand for battery storage technology is drawing Boston-based ArcLight Capital Partners to increase its footprint within the renewable sector, marked by the recent formation of Elevate Renewables, its own company focused on battery storage.

Earlier this week, ArcLight committed $150 million to Elevate Renewables, a Boston headquartered company that was formed by the PE firm last year.

ArcLight partner Angelo Acconcia told PE Hub that demand for utility scale battery storage is rooted in the fact that this technology has become a key part of the renewables agenda.

Angelo Acconcia, ArcLight Capital Partners

“We see a significant mega trend in electrification which is driving decarbonization and providing sustainable infrastructure,” Acconcia said. “That’s a multi-decade investment trend where we see power demand growing across the United States potentially two to three times over the next 10 to 15 years.”

Elevate Renewables develops utility scale battery storage resources that are co-located with ArcLight Capital’s existing portfolio of power infrastructure.

Elevate Renewables clientele is drawn from household use, industrials, and transportation as the world races to reduce reliance on polluting sources of energy. “By virtue of placing battery storage beside existing power plants, we can send renewable electricity on to the grid in a cost advantaged and time advantaged manner to provide low carbon, low cost and decarbonized power,” said Acconcia.

The development of electric vehicles that car manufacturers are ambitiously churning out adds more urgency to the development of utility battery storage that could be used to power the charging systems.

“We don’t think today’s infrastructure has the ability to meet those needs and, increasingly, regulators and policymakers are recognizing that,” Acconcia said.

In the face of tight energy supplies or power interruptions due to factors such as severe weather conditions, battery storage technology comes in handy to provide reliable and secure and dependable power generation, Angelo said.

Government stimulus through the Inflation Reduction Act (IRA), among others, is helping to provide significant capital and tailwinds to the renewables sector. For private equity, Acconcia said, “our job is to identify and create attractive investment opportunities across that sustainable infrastructure spectrum.”

Forming Elevate Renewables

Unlike the most popular private equity strategy of acquiring companies, ArcLight formed Elevate Renewables based on the “need to capitalize on the innate advantages that we have, given our significant power infrastructure portfolio, our renewables track record and the market demand that we are seeing,” said Acconcia.

With current robust valuations within the renewable sector coupled with relatively low cost of capital, there has been serious competition among investors who are building portfolios within the sector, making the option to form its own company a viable strategy for ArcLight, said Acconcia.

“Elevate Renewables is taking existing infrastructure and leveraging the land, the grid, interconnections, the sources of power, to really provide a differentiated battery storage solution,” he said.

ArcLight is looking forward to organic growth to scale Elevate Renewables, the partner said. With the growing demand for battery storage, Acconcia said this investment can produce returns in the mid teens.

“Given the nature of this portfolio, and the synergies that are created, we are expecting mid- to high-teens rates of return from this portfolio,” he said.