1Q 2019

Distributed Storage Financing Innovations Give Vendors an Edge in the Market

In today’s distributed energy storage system (DESS) market, significant competition is emerging among project developers in search of commercial debt lending and equity investment partners. To seize a competitive edge, DESS developers must ensure their projects have a strong level of guaranteed revenue to increase the likelihood of attracting potential debt and equity companies.

Further, as battery prices and balance-of-system (BOS) costs decline, DESS developers need to focus on operational efficiencies to remain competitive. Consequently, new market participation models that use storage’s inherent flexibility to capture multiple value streams are attracting increasing attention. Stakeholders are also focusing on government incentives that enhance the bankability of DESS projects and enable DESS project value chain participants to reduce costs and drive better project performance.

This Navigant Research report explores the fundamentals and challenges of financing DESSs. The study examines innovative DESS project financing asset classes, new market participation and government policies that improve the bankability of DESS projects, and solar PV plus storage power purchase agreements (PPAs) and holistic energy management. It also provides guidance for DESS stakeholders on implementing lean practices, taking advantage of real-time integrated control software, and lowering project costs by partnering with engineering, procurement, and construction (EPC) companies.

Pages 23
Tables | Charts | Figures 5
  • What is driving the growth of distributed energy storage?
  • What are the fundamentals and challenges of financing distributed energy storage systems (DESSs)?
  • What innovative financing asset classes exist for DESSs?
  • How are market participation models and government policies improving the bankability of DESSs?
  • What is the long-term potential of DESSs in an evolving electric power industry?
  • How can lean manufacturing concepts improve financing outcomes and stakeholder value?
  • Engineering, procurement, and construction (EPC) companies
  • Energy storage software and technology vendors
  • Energy storage project developers
  • Utilities
  • Electricity industry regulators
  • Finance community
  • Investor community

Spark

Context

Recommendations

Financing Innovation Is Poised to Support Growth of Distributed Energy Storage

Fundamentals and Challenges of Distributed Energy Storage Financing

DESS Projects Offer Economic Benefits and Have Low Technological Risk Levels

Market and Regulatory Context in North America and Europe

DESSs Present Creative Solutions for Utilities and Their Customers

Assessing DESS Project Financing Risks Is a Complex Task

Innovative DESS Project Financing Asset Classes

Behind-the-Meter Host-Controlled Projects

Equipment Lease Financing

Demand Charge Shared Savings Agreement

Asset Management Service Agreement and Demand Reduction Performance Guarantee

BTM Solar Plus Energy Storage Power Purchase Agreement

BTM Utility-Controlled Projects

DR Energy Services Agreement

Lowering DESS Costs Is Critical to Improving Financing Outcomes and Stakeholder Value

Modularity Driven by Lean Manufacturing Concepts Will Improve Financing Outcomes and Stakeholder Value

Creating ROI through Flexibility Services Is Propelling DESS Sector to New Heights

New Market Participation Models for DESSs Bring Positive Benefits

Government Policy Is Improving the Bankability of DESS Projects

Federal Solar Investment Tax Credit

US State-Level Policy Actions

Germany

Solar PV Plus Storage PPAs and Holistic Energy Management Offer Opportunities for DESS Stakeholders

Solar PV Plus Storage

Holistic Energy Management

EPC Companies Are Vital to a Competitive DESS Financing Environment

Guidance for Stakeholders Moving Forward

Stakeholders Must Implement Lean Practices across the Value Chain

DESS Stakeholders Need to Focus on the Advantages of Real-Time Integrated Control Software

Owners Can Lower Project Costs by Sharing Risk with EPC Contractors

  • Services Provided by Energy Storage on the Grid by Stakeholder Groups     
  • DESS Project Delivery Value Chain       
  • Operation of C&I DESS for Demand Charge Management           
  • EaaS – Integrated DER and Energy Management Solutions
  • Overview of DER Project Finance Risks
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