The challenge in financing energy storage is getting someone else to own it. Cost and availability of financing, in general, are directly tied to risk. The ample amount of capital looking to invest in energy looks for proven and simple. Storage is neither. Utilities’ defensive tariff filings are spurring market interest in the technology, but financing is still looking at it with lab coats on, and some people feel it will be that way for a long time.
Any analysis of battery economics starts with the problem needing a storage solution. Financing options unfold from there. Each of the numerous ways to use batteries calls for different hardware characteristics and properties, for specialized energy management systems (EMS) software, for engineering configurations and other considerations that impact the value received. Once those variables are established, then their performance must be modeled against the displaced utility power. If the model does not “pencil,” then available alternative tariffs must be researched against which to operate the storage.
Leading modeling company Energy Toolbase offers 30,000 rate schedules in the United States to help developers make sense of a battery application. None of that guarantees anything.
“Estimating the savings of an energy storage project is typically based on the historical interval usage data of customer,” Energy Toolbase’s COO Adam Gerza said. “But it’s challenging for developers to accurately model storage savings over the 10, 15 or 20-year term of the project, because utility rate tariffs constantly change, as does the shape of the customer’s load profile.”
None of this leads to eager third-party financiers.
Users and vendors are assuming the risks.
For those reasons, most C&I energy storage projects currently being built are funded by the user or the manufacturer. An end-user has all the standard options available for infrastructure upgrades: cash, credit or commercial PACE (C-PACE). As a C-PACE financing specialist, I arrange funding for a large number of solar/storage deals; hundreds of millions of dollars are eager to commit. For property owners it is the fastest and easiest way to get long-term capital, if they qualify. But C-PACE underwriting does not factor issues such as the IRS’ “75% cliff,” or whether the battery management system is proven over 15 years, or if the battery specs are bankable. C-PACE makes no commitment to a project’s success, beyond qualifying the contractor or EPC as being credible and compliant. The risk burden for the eventual viability of the installation rests primarily on the property owner.
Fortunately, some manufacturers are also doing their best to fill the void of third-party financing. Big and small industry names are financing their own product and engineered solutions. Energport, for example, sells designed and engineered systems using the batteries of Chinese manufacturer Gotion (Guoxin). According to its U.S. director of sales, Bobbie Muñoz, Energport offers five-year C&I leases for which the host’s monthly payment is 50% of the actualized savings, whatever they are, with a buy-out option at end of term. They also offer a ten-year, 70% version, with a $2 million project cost ceiling on those leases.
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