Sustainable Investment Briefs: Financing for Energy Storage on the Rise

Energy storage is a hot topic these days, with more attention in particular being paid to how  battery systems are getting their financing. Perhaps the best and biggest example is the recent deal that infrastructure investor Macquarie Group closed with CIT Group to finance 50 MW of behind-the-meter storage systems being deployed in Southern California. It’s said to be the largest such battery project to get bank funding to date.

Macquarie is developing a $200 million portfolio of energy storage projects that it acquired last July from Advanced Microgrid Solutions; AMS will help Macquarie develop the projects. The systems will be installed at commercial and industrial sites, including at 27 Walmart stores and Kilroy Realty Corporation’s properties across the region. CIT will provide an undisclosed amount of non-recourse debt financing for the battery systems.

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Large-scale battery systems are, of course, crucial to wind and solar becoming major and regular suppliers to the grid. Lenders, though, have traditionally been loath to back such projects, in part because of a lack of reliable revenue streams. With costs plummeting and technology improving, leading to energy storage mandates in California, Massachusetts and New York, utilities now appear more willing to enter into long-term contracts with battery developers like AMS, which can help ensure steady long-term revenue.

And there is growing demand from corporate customers for behind-the-meter energy storage systems that reduce demand charges, the premium charged to businesses by utilities during peak demand times, which can add 50% or more to their bill.

These factors have led to the development of multiple revenue streams for behind-the-meter storage projects, which increases the value of energy storage and is now being seen as the key to raising project financing.

The Macquarie/AMS project will have three separate revenue streams. The corporate end-users will pay to store energy in the batteries that create energy savings; Southern California Edison will buy power from the batteries through 10-year PPA contracts for capacity; and the storage systems will offer the grid services like voltage management and reserve capacity.

AMS uses batteries and its proprietary software system to aggregate and operate the buildings as a “fleet” that can be used as a grid resource, according to founder Susan Kennedy.

Developers are looking to build some $2.5 billion in energy storage systems globally this year, Bloomberg notes. Among the other lenders that are looking to back such projects are Prudential Financial and Investec.

Besides this major development, there’s been a ton of other energy storage news in recent weeks from around the world. Here’s a quick look at a few of the more interesting recent developments in this fast-growing space, plus a few clean tech news items from outside the energy storage sector.

San Diego Gas & Electric Co. is expanding its investments in energy storage, agreeing this month to 83.5 MW in storage through five battery projects. These five are in addition to a 30 MW system – said at the time to be the world’s largest battery system – it agreed to in January. One of the five new projects will be even larger, at 40 MW. The utility says the six battery systems will help it incorporate more solar and wind into its grid.

In another Macquarie deal, the Australian bank agreed in April to pay GBP2.3 billion (about $3 billion) to buy the U.K.’s Green Investment Bank. The privatization was delayed due to political opposition and negotiation over the final price. The bank has direct or indirect stakes in projects ranging from energy efficient street lighting and biomass plants to wind farms and a waste-to –energy plant. Macquarie, which already oversees the world’s first offshore wind fund, is expected to commit another GBP3 billion to green projects over the next three years.

A Swiss fund that focuses on energy storage has reached its first closing at €66 million ($72 million). Investors in the SUSI Energy Storage Fund include pension funds and insurance companies. The fund, run by SUSI Partners, made its first energy storage investment last year when it helped finance 12 MW of energy storage across two projects in Ontario. Future investments will include microgrids and load-leveling projects. The fund is targeting €250 million in total assets, and it is already €14 million into its next round.

Primus Power, a California-based energy storage company, has secured $32 million in equity financing to ramp up production of its batteries. New investors include Matador Capital and Hong Kong’s Success Dragon; existing Primus investors who also participated in this financing include DBL PartnersAnglo American Platinum, I2BF and the Russia Kazakhstan Nanotechnology Fund. Since its founding in 1999, the company has raised $94 million in equity and $20 million in government grants.

China’s BYD is expanding its energy storage systems across Europe, launching a new high-voltage storage system, the B-Box HV, aimed at commercial and industrial users. The company, which makes batteries and electric vehicles, already offered a lower-voltage B-Box system for residential users in Europe. The new high-voltage B-Box uses a serial connection of battery cells, which BYD says is a first in the industry.

The largest wind turbine maker in the world is considering a push into energy storage as a means to increase wind power globally and bring down costs. The chairman of Danish wind giant Vestas says he sees a lot of smaller energy storage start-ups “that might be of interest,” and adds that his company has €3.2 billion ($3.5 billion) in cash on hand and no debt. “So we can afford to invest,” he says The company may choose to take small stakes in many companies rather than making one large acquisition.

The Energy Storage Association and 52 private companies are asking that energy storage be included in talks of rebuilding America’s infrastructure. In a letter to Congress, the groups note that the federal government could take numerous steps to make energy storage adoption more efficient and cost-effective. “Modernization and innovation on the electric grid can reap immense rewards in creating a more resilient, reliable, cost-effective, and sustainable U.S. electric system,” the groups say.

Chinese private equity firm SDIC Fund Management will pay $47 million for a 20% ownership stake in Maxwell Technologies, a San Diego-based company that makes ultracapacitor energy storage systems. SDIC already has significant stakes in battery companies, new energy system integrators and other companies in the Chinese automotive and electricity industries. Maxwell officials say the investment will allow them to expand their technology development, as well as give them marketing opportunities in China, the top market for ultracapacitors.

British utility Limejump is pairing with renewable energy and energy efficiency developer Anesco to bring 185 MW of energy storage to the British grid by the end of next year. It will be the “largest portfolio of energy storage in the U.K.,” the companies say, and will “play a significant role in balancing the grid through the capacity market, frequency response and wider market participation.” Some experts say deals like this one are further proof that the U.K. energy storage sector is about to take off.

Arizona public utility Salt River Project has signed a 20-year power purchase agreement with a subsidiary of NextEra Energy Resources that calls for a solar plant paired with energy storage. NextEra will build and own a 20 MW photovoltaic generator and a 10 MW lithium-ion energy storage system at a site in Pinal County, southeast of Phoenix, selling the resulting electricity to the utility. The project is scheduled to start producing electricity by year-end.

A Canadian energy storage company wants to use compressed-air underground caverns for large-scale energy storage. Hydrostor, which is also working on storing energy as compressed air in large balloons underwater, says its compressed-air system can come at half the cost of batteries. Other companies are also looking at compressed-air energy storage, or CAES, including a New Hampshire firm that plans to store compressed air in pipes and a California CAES company that will use steel tanks.

Canada’s central government will accelerate its clean energy spending in coming years, with C$1.7 billion ($2.2 billion) in spending planed in next five years, starting in the current fiscal year that began April 1. Funding priorities will include project financing for clean tech investments; the recapitalization of the Sustainable Development Tech Fund; more tax deductions for geothermal projects; and increased equity financing for clean tech firms looking to scale up.

Inocucor, which produces sustainable biological crop products, has closed a $38.8 million Series B funding round. The Montreal-based company will use the funds to open a new headquarters and commercial office in the U.S., increase manufacturing capacity in Montreal, and add managerial and scientific staff. Through a patented fermentation process, Inocucor makes environmentally friendly soil and plant optimizers that are aimed at improving crop yields and shorten growing cycles. This fundraising round was led by TPG Alternative and Renewable Technologies.


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