- What are the major applications and use cases for UES and C&I battery systems?
- What are the different types of project development and construction contracts that project owners and developers sign?
- What are the different types of monetization contracts that project owners and off-takers sign?
- What are the existing deal structures for major use cases of UES and C&I systems?
- What are the various risks associated with developing and financing battery storage projects?
- What are the existing regulatory policies and government incentives for battery projects?
4Q 2023
Stable Financing Strategies Are Key to Building Successful Battery Storage Projects
The transition from fossil fuels to renewable sources of energy such as solar and wind energy is happening at a rapid pace. Energy storage systems are an integral part of this transition as solar and wind generation can be intermittent, so storing excess energy in battery storage systems is necessary for grid stability. The two major types of battery storage systems—utility-scale energy storage (UES) and commercial and industrial (C&I)—provide capacity and ancillary services to utilities, aggregators, and wholesale markets. Project owners and developers enter into different types of contracts to build and monetize their battery systems and provide these services to customers.
Most battery system owners use third-party debt financing for their UES or C&I projects with deal sizes ranging from $200,000 to $250 million. This Guidehouse Insights study focuses on the types of project development and monetization contracts that project owners sign. Developers and owners must understand different deal structures and their associated risks to select appropriate project development and revenue contracts for their battery projects. Currently, the prevalent development and construction contracts are turnkey and build-transfer, while the most popular revenue forms are power purchase agreements (PPAs) and merchant service contracts.
This study analyzes the types of construction and monetization contracts prevalent in today’s market and the various financing risks associated with them. It provides an analysis of the deal structures and revenue contracts used for major UES and C&I systems such as solar plus storage projects, non-wires alternatives, virtual power plants, and resiliency services. It also explains the various technology, operations, construction, and revenue risks associated with building a battery project and the supporting government incentives. Also included are best practices and contracts utilized by NHOA and Pivot Power in developing their recent battery system projects.
Pages
19
Tables | Charts | Figures
8
Key Questions Addressed
Who Needs This Report
- Battery Project Developers
- Financial Institutions
- Construction Companies
- Battery Equipment Manufacturers
- Utilities
- Battery System Aggregators
- Independent Power Producers
- Government Agencies
- Battery Insurance Providers
Table Of Contents
Spark
Context
Recommendations
Utilities and Industries Are Deploying Battery Energy Storage Systems to Fulfil Capacity Requirements and Resource Adequacy
UES Applications
C&I Battery Storage Applications
Project Owners Are Looking to Minimize Construction Risks through Build-Transfer and Purchase and Sale Agreements
Construction and Development Contract Owners Can Now Enter Project Development Contracts with Greater Control and Minimal Risks
PSA
EPC or Turnkey Contract
Case Study: NHOA Energy’s Kwinana Project
BTA
PPAs, Leases, and Merchant Revenue Contracts Offer Various Benefits to Project Owners and Off-Takers in Today’s Market
PPAs
Merchant Services
Leases
Tolling Agreements
The Revenue Streams and Deal Structures for UES and C&I Storage Systems Are Evolving Over Time
PPAs and Merchant Revenue Are the Most Preferred Types of Deals for Utility-Scale ESSs
Utility-Scale Solar Plus Storage
IPPs
Integrated NWAs for T&D Asset Optimization
Europe’s Ambitious Investments in Grid-Scale Battery Storage Projects
C&I Battery Storage Systems Rely on DR Programs and Ancillary Services Through Wholesale Aggregators to Generate Revenue
Demand Charge Management
VPPs
Resiliency and Backup Services
Understanding Financing Risks and the Existing Regulatory Landscape Increases Project Security
Technology Risks
Case Study: Pivot Power’s Hybrid Battery System
Construction Risks
Operating Risks
Revenue Risks
Battery System Owners Are Increasingly Opting for Insurance Solutions to Safeguard Their Investments
Regulatory Landscape, Tax Credits, and Government Incentives
US Incentives
European Incentives
List of Charts and Figures
- An Illustration of FTM and BTM Battery Storage Systems
- Overview of Project Development and Monetization Contracts
- Types of Project Development Contracts between Owners and Developers
- Deal Structures and Revenue Streams for UES systems
- Deal Structures and Revenue Streams in the C&I Segment
List of Tables
- Scale of Projects and Deals in the Utility-Scale Market Segment
- Project and Deal Scale in the C&I Market
- Range of Monthly Electric Demand Charges Across States ($/kW per Month)
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