Five Takeaways: Early Moves and Current Trends in Energy Storage

By and on May 29, 2020

McDermott continues its dialogue with renewable industry leaders to provide the latest market updates on the disruption, challenges and opportunities COVID-19 presents to the industry. This week, we focused on the energy storage market and hosted Chris McKissack, CEO at GlidePath Power Solutions. Glidepath was an early mover in energy storage. GlidePath is now one of the largest energy storage developers and independent power producers in the US, with over 100MW of commercially operating battery projects, 445 MW of battery storage and renewable energy projects, and 2.1 GW of greenfield development pipeline of battery storage projects across the US. We had an engaging discussion spanning the benefits of being an early mover in the storage space, the current state of the dynamic energy storage market, and successful strategies you can use to approach the opportunities and challenges stemming from COVID-19.

1. Batteries Can Now Serve as “Shock Absorbers” for the Grid

Batteries are capable of doing much more than just “energy shifting,” where a developer simply stores energy from a solar project from one time of day and dispatches it onto the grid at another time of day. For instance, we are now able to place stand-alone batteries closer to load than most large-scale wind and solar projects. This provides an opportunity for frequency response and regulation in that it allows grid operators to dispatch generators more efficiently. This is important to today’s market. 60 years ago, we had an unpredictable load, but very predictable generation. You could ramp-up and ramp-down generation by turning a dial. Today, we have more and more intermittent resources and renewables dispatching the grid resulting in more demand response. We now have both unpredictable load and unpredictable generation, making it much more difficult for the operators of the grid to balance the two. There is an opportunity for batteries act like shock absorbers for the grid and keep things stable.

2. Batteries Remain Key to Energy Shifting and Financial Energy Arbitrage

Despite the versatility of batteries, energy shifting remains an important use for batteries, particularly for financial energy arbitrage. Batteries provide an opportunity for load customers to marry their purchase of energy with their load and shape it to a particular financial profile. We see a lot of this usage by datacenters today and this trend will continue.

3. Early Movers in Energy Storage Will Likely Emerge from COVID-19 Even Stronger

The battery energy storage market was poised for a period of sustained growth in 2020 and 2021, but it is unlikely to emerge totally unscathed from COVID-19. According to some forecasts, market growth is now forecast to decline for 2020. The pace of the recovery will depend how quickly the COVID-19 crisis is resolved. However, depending on the agility of the company’s management and the status of the development of its projects going into COVID-19, some battery storage companies may come out of COVID-19 even better positioned in the market. Some will not skip a beat. Those that are late movers in storage likely have early stage development requirements such as town hall meetings and local permitting processes that have been placed on hold due to stay-at-home orders. Early movers in energy storage, however, have the advantage of mature portfolios where much of the early stage development requirements are out of the way and they can instead focus on positioning themselves in the market. One example is Glidepath’s ability to successfully go to market during the pandemic to sell its portfolio of energy storage projects in New York, each of which is fully developed, shovel-ready, and past the permitting and interconnection processes. It helps that Glidepath’s management and development team have been headquartered in Illinois, but working remotely for years due to the need to be spread out across the country on 18 different projects.

4. Versatile Energy Storage Products Require Bespoke Offtake Products and Arrangements

Over time, we have seen an evolution in the types of offtake agreements that are being signed up for energy storage projects, ranging from traditional power purchase agreements (PPAs) to tolling arrangements. There is no one-size fits all arrangement for energy storage. Depending on the merchant components, who the buyers may be, and the type of project the buyer is looking for will determine what is, in most, cases a custom tailored offtake arrangement to meet the buyer’s needs and the use of technology. For instance, what may work for a stand-alone storage project will differ from a solar plus storage project, and that will differ from a project where you are placing storage at a wind farm. There are now a variety of offerings to make to customers, and it really takes a lot of creativity to put together the appropriate offtake agreements. Gone are the 90’s where you simply had a bus bar PPA for a wind farm with no shaping and where the offtaker essentially just took whatever MW hours you produced. Early movers in energy storage like Glidepath now have a strong set of power marketing and quantitative people on their teams that really look into how systems operate, how systems get dispatched and, in many cases, how to craft an offtake agreement to accompany the product that is best for their buyers.

5. Quality Control in the Energy Storage Supply Chain is Especially Critical

There continues to be a lot of disparity among battery producers in regards to what those companies look like, how the manufacturing is done, what technological advancements they are making. It is essential for a developer to get to know how their suppliers are ensuring quality control, advancing their products, and properly packaging their products for their end-users, including meeting all of the codes that continue to change and evolve. It is important for the developer to really have its finger on the pulse of all of these things. For example, Chris has personally visited over 200 GW hours of facilities both domestically and overseas to personally observe battery manufacturing and operations. There is an advantage for a developer being more deeply involved in the supply chain and not just writing a check to a large integrator.

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Edward Zaelke
Edward (Ed) Zaelke is the global co-head of the Energy & Project Finance Practice. He focuses his practice on project finance and private equity in renewable energy transactional matters. With more than 30 years of experience, he advises clients on all elements of alternative energy development and finance, including equity and debt financing, merger and acquisition transactions, equipment purchase and sale agreements, power purchase agreements, siting and other real property issues, governmental approvals, and engineering, procurement and construction (EPC) contracts. Read Ed Zaelke's full bio

Carl J. Fleming
Carl J. Fleming is a transactional lawyer whose principle areas of practice are renewable energy and private equity. He leads transactions throughout the US and worldwide for a number of the renewable industry’s leading developers, global private equity funds and Fortune 500 companies. He provides legal, commercial and strategic advice on the development, purchase and sale and financing of renewable energy projects in wind, solar, energy storage, electric vehicles and other low carbon solutions. A partner in our Washington, DC office, he also advises on a number of energy and climate change policy issues. Read Carl Fleming's full bio.




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