“My job at SunEdison is to get the YieldCo comfortable with energy storage. When we do, it will be groundbreaking.” Three
battle-scarred renewable energy veterans, now deep in the energy
storage industry, confronted the challenges of getting energy storage
projects financed in 2015 during a panel discussion at the recent Grid Edge Live conference. The panel paid repeated tribute to the "solar/energy storage parallel" narrative.
When
it comes to solar project finance, the PV market is in the midst of a
small golden age of sorts. Tax equity funds and PPAs are now joined by asset-backed securities, the potential for MLP status, loans, community solar, PACE financing, and solar bonds as some of the tools that can back solar projects. Energy
storage can only hope for a similarly robust investment environment in
its near future. Right now, energy storage really only has
project-finance funding totaling a few tens of millions (USD).
Paul Detering, CEO of Coda Energy,
noted, "As solar matured, it bifurcated to [investors] who wanted to
own assets and people investing in a corporation. In energy storage,
it's still very early, and we still see a blending of the two. At Coda,
we have investors in corporate purposes, as well as in projects. We
currently own the projects on our balance sheet." Detering expects to
see new and "interesting models" emerge in terms of how energy storage
revenue streams are shared.
Coda has teamed with Fortress
Investment Group to launch a no-money-down financing program for
demand-charge reduction for commercial and industrial customers. It’s
the same approach taken by startups like Stem, Green Charge Networks,
and SolarCity with its partner Tesla.
Tom Leyden, another panelist
with decades of experience in solar, was asked if the pitfalls for
energy storage are the same as for solar. Leyden said that when he was
at PowerLight, a 50-kilowatt project was the biggest in the country at
the time. He said it was hard to get financed then, but now Warren
Buffett is making $2 billion investments in solar. Leyden added, "Energy
storage is new and anything new has risk. It's kind of hard to monetize
the benefits that energy storage provides."
SunEdison acquired Leyden's company, Solar Grid Storage,
to beef up its storage offering, in turn allowing SGS to gain access to
SunEdison’s financing and reach. Leyden suggested in a previous
interview that SunEdison would be looking to co-locate storage with
solar or wind projects. "Storage doesn't have long contracted
revenues; we can't go into the YieldCo." He also noted that SGS was big
in PJM's frequency regulation market, "but it's not contracted revenue."
He added, "My job at SunEdison is to get the YieldCo comfortable with
energy storage. When we do, it will be groundbreaking."
Gerrit
Nicholas, president of K Road DG, said, "Storage really is taking a
similar pattern to solar. The difference is that you don't have the same
contractual structures that will evolve as technology and the market
evolves." He added, "In the 2010 solar market, the worry was
construction risk. Today, nobody thinks about construction risk in PV."
Leyden
said, "We're going to add the ability to communicate with energy
storage systems around the world." He suggested that a small and large
system in Illinois or Maryland could "act as one asset," identifying
this approach as "the evolution of the grid."
Moderator Ravi
Manghani, senior analyst of energy storage at GTM Research, summed up
the panel this way: "A recurring theme was that advances in storage
financing are going to come more quickly, taking advantage of financing
innovations (and mistakes) on the solar side. Second, while these
comparisons between solar and storage are interesting conversation
points, it is important to note that value streams provided by storage
differ from traditional solar PPAs. What makes storage financing
interesting and challenging at the same time are the different value
streams that can be accrued along the grid, and by different
participants."
He added, "In many cases, these value streams are
yet to be monetized, so unlike solar PPAs that are expected to stay flat
(or grow per some set escalator), storage assets financed today for a
particular use case such as demand-charge reduction could be used for
other applications such as frequency regulation or capacity performance
in the future. But figuring out the right financing vehicle for those
assets today still remains a challenge."
GTM Research predicts
the U.S. will deploy 220 megawatts of energy storage in 2015, with the
market on a path to reach 861 megawatts of annual installations and a
value of $1.5 billion in 2019, about 11 times its 2014 size. Meanwhile,
energy storage companies have garnered about $112 million in investment
so far this year, with about $40 million going to energy storage
management providers Greensmith, Advanced Microgrid Solutions and Stem.
Other key energy storage management software providers include Geli and
1Energy.
Figure: 2015 Investment in Energy Storage
