Renewable Energy World | By: Brian Christopher Greene and Deanne M. Barrow | GPE – July 19, 2017:
Part One: Technological and cost breakthroughs are expected to lead to rapid growth in the number of utility and behind-the-meter storage projects.
Industry insiders say the energy storage market in 2017 feels like the rise of the solar industry in the late 2000s. In 2016, energy storage developers in the U.S. installed 336 MWh of storage, double the amount from the previous year. By 2022, energy storage installations are expected to reach 7,300 MWh and generate revenues of $3.3 billion.
States are stepping in to provide rebates and energy storage mandates. Deal flow is picking up, with lenders and investors eager to move in on this emerging trend.
In the last two years, at least two non-recourse project financings of standalone energy storage projects have closed in the U.S. For the energy storage market to reach its expectations, lenders and investors will have to get their heads around the unique risks posed by storage projects.
Part Two: In part one of this article, we discussed the types of energy storage and the incentives that are supporting its development. Now let’s look at the financing issues and the project risks associated with energy storage today.
Investors and lenders are eager to enter into the energy storage market.
In many ways, energy storage projects are no different than a typical project finance transaction. Project finance is an exercise in risk allocation. Financings will not close until all risks have been catalogued and covered. However, there are some unique features to energy storage with which investors and lenders will have to become familiar.
Energy storage projects provide a number of services and, for each service, receive a different revenue stream.
Distributed energy storage projects offer two main sources of revenue. Capacity payments from the local utility are one. Power purchase agreements providing capacity payments for distributed energy storage systems with terms of 10 years or more are becoming customary in California. Payments for demand charge management for on-site load are another.
To read Part One in full – please click here.
To read Part Two in full – please click here.
