Energy Storage Financing Study Series

The Energy Storage Financing study series is an outreach effort to the financial community funded by the U.S. Department of Energy’s Energy Storage Program at Sandia National Laboratories in order to accelerate energy storage technology investment and project development. The study series’ goal is to promote wider access to low cost capital through reducing the economic, technical, and regulatory risk of investment in this emerging market.

These studies are focused on a number of critical needs such as:

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Energy Storage Financing: A Roadmap for Accelerating Market Growth

The first study in the series. Energy Storage Financing: A Roadmap for Accelerating Market Growth {SAND2016 -8109} laid the groundwork by evaluating the current market for financing energy storage projects and provided a roadmap for possible act ions the U.S. Department of Energy could pursue. Project financing is emerging as the linchpin for the future health, direction, and momentum of the energy storage industry. Market leaders have so far relied on self-funding or captive lending arrangements to fund projects. New lenders are proceeding hesitantly as they lack a full understanding of the technology, business, and credit risks involved in this rapidly changing market. The U.S. Department of Energy is poised to play a critical role in expanding access to capital by reducing the barriers to entry for new lenders and providing trusted analytical benchmarks to better judge and price the risk in systematic ways.

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Energy Storage Financing: Performance Impacts on Project Financing

The second study in the series, Energy Storage Financing: Performance Impacts on Project Financing {SAND2 018 -10110] evaluated the impact of performance on financing projects and the methods to de-risk project development. Understanding performance is the key to risk management in energy storage project financing. Technical performance underlies both capital and ope rating costs, directly impacting the system’s economic performance. Since project development is an exercise in risk management, financing costs are the clearest view into how lenders’ perceive a project’s riskiness. Addressing this perception is the challenge facing the energy storage industry today. Growth in the early solar market was hindered until OEMs and project developers used verifiable performance to allay lenders’ apprehension about the long-term viability of those projects. The energy storage industry is similarly laying the groundwork for sustained growth through better technical Standards and best practices. However, the storage industry remains far more complex than other markets, leading lenders to need better data, analytical tools, and performance metrics to invest not only to maximize returns, but also safely – through incorporating more precise performance metrics into the project’s documents

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Energy Storage Financing: Advancing Contracting in Energy Storage

The third study in the series, Energy Storage Financing: Advancing Contracting in Energy Storage {SAND2019 -12973) focused on the development of standardized project development contracts language to reduce the time and cost for project development and financing approval. The lack of standard financing contracts and supporting documents is inhibiting the growth of the energy storage industry. A number of firms are actively developing proprietary contract structures, resulting in a variety of unique attributes. This leaves the market disjointed for 3rd party financing groups looking to scale their lending. Lack of commonality and harmonization between developer and lenders raises project execution costs and causes delays in financing. Of special concern, projects based on emerging technologies are finding an increasing uphill climb for equal consideration by developers and lenders, leaving their potential commercialization in peril. This study will evaluate the development of standardized contracts to reduce the cost and contract approval time, learning from success in renewable energy project development. The goal of this study is to determine the key requirements for standard contracts in the emerging energy storage market and suggest avenues for possible industry led development.

Energy Storage Financing: Project and Portfolio Valuation

The fourth study in the series (currently ongoing), Energy Storage Financing: Project and Portfolio Valuation is focused on evaluating the valuation of individual projects and portfolios to provide greater visibility for institutional investors wanting to support significantly larger deployment of energy storage assets. Energy storage project valuation methodology is similar to other power sector projects through evaluating various revenue and cost assumptions. Through the use of a standard proforma framework, the Study will evaluate the current tools available and highlight the risk issues pertinent to energy storage projects. Investing in portfolios of energy storage project are still an emerging challenge for institutional investors, and so the Study will also look at the specific challenges facing institutional investors with plans to invest large amounts of capital into the market.