Financing the Energy Transition

BESS: The UK leads, Europe follows

Battery energy storage systems (BESS) featured prominently in the discussion. Participants noted that the UK remains one of the most progressed BESS markets globally, with a well-established financing ecosystem and a growing track record of operational projects. The maturity of the UK market is now serving as a template for other European jurisdictions that are earlier in their BESS journey. 

Germany was highlighted as a particularly notable example. Financing structures for German BESS projects are increasingly being built around a blend of contracted revenues and a degree of merchant risk, a model that mirrors the path taken in the UK several years ago. This hybrid approach reflects the broader trend discussed at the roundtable: the market is moving away from fully contracted models, but lenders still require a meaningful revenue floor before they are willing to extend credit. The consensus was that as policy frameworks in continental Europe continue to develop and revenue models become more established, further BESS markets are likely to reach a similar level of financing maturity. 

Data centres and solar co-Location: A pragmatic response to grid constraints

A significant portion of the discussion focused on the intersection between data centres and renewable energy, and specifically the growing trend of co-locating solar generation assets with data centre developments. 

Grid connection constraints were identified as one of the most significant bottlenecks to project delivery across multiple markets. Participants noted that securing a timely grid connection has become extremely difficult, with queue times extending well beyond commercially viable development timescales. In this context, the co-location of solar and data centres offers a pragmatic solution: by situating generation capacity alongside demand, projects can be developed and brought online now (behind the meter), without being held up by grid connection delays. 

This model effectively allows developers to bypass one of the principal infrastructure constraints currently facing the market, and it has attracted considerable interest from both equity investors and lenders. From a financing perspective, co-location structures benefit from a clear demand profile (the data centre itself), which provides a degree of revenue visibility that pure merchant solar projects typically lack. 

Deal structures: Fewer portfolios, larger single assets and joint ventures

The roundtable revealed a clear shift in deal dynamics. Participants reported that portfolio transactions, which had been a dominant feature of the market in recent years, are becoming less frequent. In their place, the market is seeing more large-scale single-asset deals. 

These larger individual projects bring their own structural considerations. In particular, the capital requirements of larger projects tend to exceed what a single investor is willing or able to commit, leading to a rise in joint venture structures that bring together multiple investors. This was discussed in some detail in the context of co-investment and club deal dynamics: while multi-party equity structures can add complexity to negotiations and governance, they are increasingly seen as essential to getting the largest transactions across the line. 

From a legal and structuring perspective, participants noted that JV arrangements require careful attention to decision-making rights, exit mechanisms and alignment of investment horizons, particularly where investors with different risk appetites and return expectations are sitting around the same table. 

Lender appetite: Merchant risk remains the boundary

One of the clearest messages from the roundtable was that lender appetite for merchant risk remains constrained. While there has been meaningful evolution in lenders' willingness to engage with newer technologies and hybrid revenue structures, the fundamental requirement for at least a portion of contracted revenues has not shifted. 

Participants from the lending community confirmed that credit committees continue to scrutinise merchant exposure closely. The willingness to lend against fully merchant revenue profiles remains limited, and where merchant risk is present in a deal, lenders expect it to be accompanied by a meaningful contracted component, whether through corporate power purchase agreements, contracts for difference, tolling arrangements, or other mechanisms that provide a revenue floor. 

Looking ahead

The roundtable concluded that there is no shortage of capital seeking deployment into the sector, but aligning debt, equity, policy support and project delivery timelines remains the central challenge. The themes discussed, BESS market maturation, creative responses to grid constraints, evolving deal structures and the persistent boundaries of lender risk appetite, all reflect a market that is maturing, adapting and finding pragmatic solutions to complex problems.