Previously published by Proximo
The last five years have seen a huge increase in the number of installations of battery storage systems – and an increase in financing volumes for the asset. Proximo asks a panel of industry experts whether policies and technologies are robust enough to maintain this momentum...
Energy storage in its broadest sense has a long history in project finance. From the boom in pumped storage hydroelectric projects late in the last century, to the gas storage build out that took place from 2000 on, developers have looked to raise capital against the arbitrage opportunities and network reliability services that storage provides.
More recently, over the last fifteen years, renewables developers have incorporated storage elements into their generation projects. Wind farms connecting to smaller grids were early adopters of battery technology, while concentrating solar plants usually featured some kind of storage medium, often molten salt.
But as lithium-ion technologies improved – in large part thanks to their use in electric vehicles – their potential for assisting with grid stability and ease of integration with renewables improved. The technology has attracted increased attention from financial sponsors, and project financings for the technology are slowly getting longer and cheaper.
Does this mean battery storage has become mainstream? Proximo gathered a group of development, financing and advisory specialists to discuss whether there is still a policy impetus towards greater use of storage, whether project finance lenders still need to do more to get comfortable, and whether every self-respecting sponsor needs storage in its portfolio.”
Proximo: Has there been an increased policy focus on grid reliability in the wake of recent issues in the Texas market, and is that feeding through to more bankable and investible storage projects?
Lee Van Atta: Texas leaders have a lot to unpack around what happened with the winter storm event, which went on for multiple days. But a stronger link between reliability events and a focus on batteries can be observed from last summer in California. California already had a significant level of mandates and policy focus around energy storage, and that seems to have been amplified in response to the problems they had last summer. There’s a strong relationship between renewable penetration and what that does to the grid and market prices, and that's where you start to see opportunities for energy storage. Ancillary services were designed without batteries in mind, so there's a need to catch up in competitive markets, and we need leadership from FERC. Energy storage will fit right into the Biden administration’s renewable goals as well. Outside of the competitive markets and California, particularly in the south-east, the process is really driven by the utilities and what their ratepayers want to see in the generation mix.