Four energy efficiency and storage funds to buy now
Energy efficiency and energy storage funds offer another way to invest in renewable power and profit from the green boom.


Energy efficiency funds are an increasingly popular part of the infrastructure asset class. Four London-listed funds are currently valued at over £1.5bn – going up in value by the month with new placings and fund raisings – and there will surely be more launches in the wings. I’m a non-executive director of one of these, the battery fund Gresham House Energy Storage (LSE: GRID), so I’m not going to make any comment about the attractiveness or otherwise of any individual fund, but here’s a quick run-through of the basics.
A new kind of infrastructure
These funds look a bit like other infrastructure funds: they are income focused, backed by real assets, and generate inflation-linked dependable cash flows. The average yield over the next few years should be in the 4%-7% range, which explains why all four trade at big premiums to net asset value – 16% for SDCL Energy Efficiency Income Trust (LSE: SEIT).
However, unlike many infrastructure funds, there is little government involvement (ie, no contracts underpinned by the state), although government policy can have an impact on revenues. They also act more like operational businesses, buying and selling services to commercial end-users.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
With the energy-efficiency funds, these users might be corporate clients. For example, SEIT, which listed in 2018, recently invested in a US business called RED Rochester that provides services such as electricity, steam, water and compressed air to customers in a business park. RED has over 100 customers, typically on 20-year contracts, with renewals linked to their tenancies.
Meanwhile, Triple Point Energy Efficiency Infrastructure (LSE: TEEC) raised £100m in an initial public offering in October 2020 to invest in low-carbon heat distribution, social-housing retrofit and industrial energy efficiency, and distributed generation. One deal involves community heat and power (CHP) assets that generate heat for big commercial greenhouses. These are more efficient than the old engines and less carbon intensive. Even the carbon dioxide waste from combustion is used to enhance crop yields.
In both projects, we can see long-term contracts, frequently inflation linked, with defined cashflows. There are no worries about governments, subsidies, or wholesale power prices (unlike renewable energy funds).
Very big batteries
The two battery funds, GRID and Gore Street Energy Storage (LSE: GSF) are rather different. Renewable energy creates lots of power at the wrong times. These funds own storage batteries that take in electricity when it’s plentiful (and thus cheap), and supply it when it’s needed (and therefore expensive).
Clients include the national grid operators, who are keen to make sure that there is spare capacity in the system to cope with peak periods of use or sudden unscheduled outages.
These funds have been busy buying into new projects, some of which are in the fast-growing Irish market. Both have a strong sustainability angle, in that they enable the push towards renewable power in the UK. This may help explain why big institutions have been buying into them.
A victim of popularity
What of the risk? Rising inflation could increase equipment and operating costs. Higher interest rates might make their yields less attractive. Operationally, all these funds depend on complex optimisation and valuation models with varying inputs (forward market pricing, inflation, discount rates) which can change over time. Income investors should keep an eye on operational net cash flows to underpin dividends.
Government policy might change (eg, more nuclear power would make storage less important), although that is unlikely. The greatest risk is that too much money goes into these energy efficiency niches, pushing down rates of return
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.

David Stevenson has been writing the Financial Times Adventurous Investor column for nearly 15 years and is also a regular columnist for Citywire.
He writes his own widely read Adventurous Investor SubStack newsletter at davidstevenson.substack.com
David has also had a successful career as a media entrepreneur setting up the big European fintech news and event outfit www.altfi.com as well as www.etfstream.com in the asset management space.
Before that, he was a founding partner in the Rocket Science Group, a successful corporate comms business.
David has also written a number of books on investing, funds, ETFs, and stock picking and is currently a non-executive director on a number of stockmarket-listed funds including Gresham House Energy Storage and the Aurora Investment Trust.
In what remains of his spare time he is a presiding justice on the Southampton magistrates bench.
-
Small UK industrial stocks are hidden gems
Opinion Ed Wielechowski of the Odyssean Investment Trust highlights three of his favourite British small-cap industrial stocks
-
Aurora Innovation is running on empty – is it overvalued?
Aurora Innovation, a maker of self-driving trucks, may have promised far more than it can deliver
-
Small UK industrial stocks are hidden gems
Opinion Ed Wielechowski of the Odyssean Investment Trust highlights three of his favourite British small-cap industrial stocks
-
Aurora Innovation is running on empty – is it overvalued?
Aurora Innovation, a maker of self-driving trucks, may have promised far more than it can deliver
-
'Ride the recovery in emerging markets': Gustavo Medeiros of Ashmore Group tells MoneyWeek
Interview What's the outlook for emerging markets? Gustavo Medeiros, head of research at Ashmore Group, gives his analysis and reviews progress in developing economies
-
What is the Enterprise Investment Scheme and should you have one?
The Enterprise Investment Scheme is tax-efficient and potentially lucrative. Taking a chance on the scheme could trim your family’s IHT bill, says David Prosser
-
The alcohol industry is suffering as consumers sober up – is it still worth investing in the sector?
Changing consumer tastes are rocking the alcohol industry, but the best players are adapting their strategies. Buy them while their shares are still cheap
-
A strange calm in credit
Corporate bond markets remain remarkably relaxed, with yields that offer little compensation for risks
-
The City's big bet on green finance fails to pay out
Opinion Insurers and banks are backing away from “green finance”, and there is not much sign of the green boom we were promised. That’s a problem for the City
-
Six top investment trusts for smaller stocks
Liquidity constraints mean investment trusts are best placed to seize the juiciest opportunities