Developer

01 In The The following is an edited transcript of their discussion.

Panelists

Anna Astretsova, Vice President of Finance, GridStor

GridStor has over 2 gigawatts of early-stage energy storage projects sited primarily across the western United States, backed by Goldman Sachs Asset Management’s Horizon Energy Storage Fund.

• • Amir Barnir, Vice President, US – Network Infrastructure, Zenobe Americas Inc.
    Zenobe has 750 megawatts of battery storage assets in operation or construction globally and more than 2.5 gigawatts of late-stage development projects, with Mr. Barnir focusing on energy storage in the United States.
  • Spencer Li, Vice President, Project and Corporate Finance, Avantus
    Avantus is a leading renewable energy developer, with a pipeline of more than 30 gigawatts (GWdc) of solar and 94 gigawatt hours (GWh) of energy storage projects across the western United States.
  • Laura Pagliarulo, Chief Executive Officer, SolaREIT
    SolaREIT specializes in providing innovative and accretive financing solutions to developers for the real estate under solar and storage projects, with hundreds of millions in assets under management across the United States.
  • David Stripling, Director of Origination, Ormat Energy Storage
    Ormat Energy Storage manages a diverse portfolio of 600 megawatts of utility-scale storage projects across high-growth markets in the United States, with a focus on renewable integration.
  • Moderator
    Outlook and Trajectory

Shellka Arora-Cox:

Mr. Barn The The Until recently, distributed generation markets were confined to states like Massachusetts and California, but we are now witnessing a nationwide expansion, with developers embracing the complexity of these projects and finding innovative ways to navigate various offtake structures.

Arora-Cox: Where do you anticipate this growth will be most pronounced–standalone storage, solar-plus-storage, behind-the-meter installations, or across all these segments?

Laura Pagliarulo: The most significant growth will likely occur in front-of-the-meter installations. Last Sol These regions present multiple use cases for storage, with front-of-the-meter installations continuing to dominate due to their scale and impact on grid stability.

David Stripling: Behind-the-meter installations are expected to lag in the near term as we observe a much larger volume of front-of-the-meter storage assets being deployed, especially in key markets like California, where regulatory drivers, such as resource adequacy requirements, are pushing adoption forward regardless of tariff implications. The impact of tariffs on 2024 commercial operation dates appears minimal, as most projects have advanced to stages where such delays are unlikely.

Location ConsiderationsArora-Cox:

Standalone storage is clearly leading the charge, but site selection is becoming increasingly challenging as land availability diminishes and the grid becomes more saturated. How do you approach site selection for battery storage installations in such a rapidly evolving market?Spencer Li:

Site selection is absolutely critical, particularly in markets with high price volatility where the potential for capturing revenue is greatest. In It California There Local and state permitting regimes must be managed adeptly to expedite project timelines and secure necessary approvals.

Anna Astretsova: I agree with Spencer’s assessment. In In Establishing a strong reputation and ensuring projects are perceived as safe and beneficial to the community are crucial factors in overcoming permitting challenges.

Market Dynamics in Texas, California and New YorkArora-Cox:

Given the distinct market dynamics in Texas and California, how would you characterize the utility-scale battery storage installations in these two states?Barnir:

California and Texas exemplify two very different market environments, each fostering growth for distinct reasons. California The In The ability to build a 300-megawatt site in 24 months and secure an offtake contract demonstrates the agility and opportunity within the ERCOT market.

Stripling: Site selection in ERCOT involves a careful balance between revenue potential and cost factors, particularly when deciding whether to position projects adjacent to load or generation. Land Battery In The interconnection costs in California can be egregious, and land prices can exert significant pressure on project economics, demanding a careful synthesis of these elements to achieve success.

Pagliarulo: Texas is rapidly reaching saturation, with diminishing returns on new developments. New New The In markets like New York, developers are navigating these challenges to position themselves effectively for future opportunities.

Interconnection ChallengesArora-Cox:

Interconnection remains a significant challenge, with more than 2,600 gigawatts of generating and storage capacity currently queued for interconnection–more than twice the total installed capacity on the grid. How 2023 to address these challenges, particularly in markets like California where additional reforms are also being considered?Barnir:

FERC Order No. The It We The 2023 are already in place in several markets, but the implementation will require ISOs to make adjustments to their processes.

Li: In California, the interconnection process is particularly cumbersome, with some projects facing delays until 2030, even under the best-case scenario. The The Developers with projects in the CAISO queue likely need to consider alternative strategies for monetizing their positions.

Astretsova: The reforms will undoubtedly introduce new layers of complexity and cost, particularly for early-stage projects. The These reforms will likely lead to a more select market where only well-capitalized and creditworthy developers will be able advance their projects. The industry must adapt to these changes and find innovative financing solutions to manage these increased risks effectively.

Financing ConsiderationsArora-Cox:

Ms. Astretsova, in light of rising interest rates, how is the financing landscape for energy storage projects evolving, and what challenges and opportunities are developers facing?Astretsova:

Investor interest in energy storage remains robust, particularly as the sector continues to demonstrate its potential for significant returns. We are seeing structures being developed to support partially contracted projects or even fully merchant ones. The IRA has increased liquidity and made storage projects more appealing to investors. The current interest rate environment requires a more strategic approach in financing. Developers are increasingly looking for hybrid structures that combine traditional loans with equity and tax equity. The industry is trying to monetize depreciation charges. Once the market figures this out, we can expect traditional tax equity structures. The introduction of tax equity has been particularly transformative, enabling projects that were previously considered too risky to secure necessary funding.

Barnir: Tax equity has indeed been a game-changer, especially for standalone energy storage projects. Tax equity has become a key component of the financing landscape, allowing for these projects. Developers were willing to take greater risks when debt was affordable. In the current environment, developers should be more cautious and focus on long-term contracts in order to mitigate risk. The shift toward contract revenue rather than relying solely on merchant revenues is a prudent strategy in the current environment, ensuring that projects remain financially viable even as debt becomes more expensive.

Pagliarulo: The debt markets are still adjusting to the unique risks associated with energy storage, much like they did with solar projects 15 years ago. Lenders need to better understand the perceived risks and real risks. We are seeing an increasing focus on securing high-quality sites with strong interconnection points, which are likely to retain their value over the long term. This makes them sound investments even in a challenging financing environment. We are seeing an increasing focus on securing high-quality sites with strong interconnection points, which are likely to retain their value over the long term, making them sound investments even in a challenging financing environment.

Future OutlookArora-Cox:

Looking ahead, how do you see the risk-return profile evolving in markets like Texas over the next five to seven years as more assets are deployed and market conditions change?Astretsova:

The energy storage market is poised for continued growth, driven by the increasing frequency of extreme weather events, which create volatility and drive revenue for storage projects. Future outlook: How do you see the risk-return profile evolving in markets like Texas over the next five to seven years as more assets are deployed and market conditions change? Astretsova:

The energy storage market is poised for continued growth, driven by increasing frequency of extreme weather events that create volatility and drive revenue for storage projects. The future trajectory of returns will be determined by the balance between storage capacity, market volatility and return on investment. Markets like Texas are well-positioned to see continued growth, despite the inherent risks, due to the state’s unique market dynamics and the ongoing expansion of renewable energy sources.Pagliarulo:

In Texas, the value of high-quality sites with strong interconnection points will remain high, even as the market evolves. These assets will likely retain their value in the long-term, making them good investments. The ability to connect to the grid efficiently and secure high-voltage interconnection points will continue to be critical factors in the success of storage projects in the region.Arora-Cox:

Finally, how are you adapting procurement strategies in response to tariffs on lithium and non-lithium batteries, and how is this shaping the market?Stripling:

The industry is still assessing the full impact of recent tariffs on the supply chain. While domestic production is expected to grow significantly by 2030, there could be a shortage in the mid-term, which would require developers to carefully manage their procurement strategies. The Biden administration has used a carrot-and-stick strategy to encourage domestic battery production. However, it is still unclear whether the production will be able to meet demand quickly enough. Developers may need to secure supplies early or explore alternative technologies to mitigate potential tariff impacts.Pagliarulo:

The industry’s experience with solar tariffs provides valuable lessons for navigating the current landscape, but energy storage presents its own unique challenges. In some cases, this may mean negotiating new terms with suppliers or seeking alternative sources of components to avoid potential bottlenecks and ensure projects remain on track. In some cases, this may mean negotiating new terms with suppliers or seeking alternative sources of components to avoid potential bottlenecks and ensure projects remain on track.Arora-Cox:

With that, I’ll open the floor to questions.Audience Question:

How are developers responding to the recent increase in tariffs, which are set to reach 25% by 2026 for products sourced from China?Astretsova:

The industry is actively seeking to secure supplies before the tariffs fully take effect. Safe harboring is a strategy that has been used in the solar sector and will likely play a part, despite the short shelf-life of batteries. The difference between projects relying on imported components and those with domestic content will be a determining factor in the viability of a project. The demand for domestically produced components is expected to surge, driven by the need to avoid substantial tariff impacts.Barnir:

Safe harboring for batteries is complex due to degradation in capacity over time. Batteries, unlike solar panels, can only be stored for a short time before the warranty kicks in and their energy capacity starts to degrade. Developers will need to carefully weigh the risks and benefits of safe harboring against the potential impact of tariffs on project timelines and costs. Developers will need to carefully weigh the risks and benefits of safe harboring against the potential impact of tariffs on project timelines and costs.Audience Question:

What is the current focus of storage development technology–solely on lithium-ion, or are other technologies being considered?Stripling:

Lithium-ion technology remains the dominant choice for energy storage due to its cost-effectiveness and suitability for the current grid requirements. Alternative technologies, such as compressed air storage and flow batteries, are being explored as the market evolves. While these technologies hold promise, they are still in the early stages of development and require further de-risking before they can compete with lithium-ion on a large scale.Arora-Cox:

Thank you to all our panelists for an engaging and insightful discussion.

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