From Fires to Financing: Best Practices in Energy Storage Due Diligence
Investors across the world are actively seeking investment-worthy energy storage projects in a range of applications-from standalone grid support to hybrid projects combining solar, storage, wind, and other combinations. The technology and business case for many of these projects can be quite complex, leaving financiers struggling to quickly gain comfort with a project before it is snapped up by a competitor. This requires a rapid and targeted due diligence process focusing on key elements:
Technology: Many are surprised to learn that lithium ion is not a single technology, but actually a broad mix of specific chemistries that all operate differently. Even once this is understood, it can be challenging to gauge the relative benefits of LFP, NMC, and other chemistries for a specific project and use case. The type of system selected must be carefully considered in the context of the proposed site, use case, and revenue streams. Projects with siting constraints may require a higher energy density to maximize space, while others may require a system with a higher resistance to thermal events to maximize safety.
Financial Modeling: Most modern storage projects participate in multiple revenue streams, frequently with only a portion of lifetime revenue coming from contracted sources. This requires careful modeling of highly uncertain future values for capacity, ancillary services, and energy. Ensuring that O&M agreements properly stipulate acceptance and ongoing testing to maintain system capacity and efficiency will minimize the uncertainty of both future costs and revenues.
Safety: Energy storage is a fast-developing technology and understanding the implications of codes and standards, such as NFPA 855 and UL 9540A are key to evaluating the potential design and installation of energy storage systems, as well as evaluating the vendors seeking to supply these technologies.
Warranties and Long-Term Performance: Warranties at both the cell and system levels are becoming more complex, requiring a balance of charging, discharging, and rest behaviors against economic use cases. These tradeoffs can be complex and system degradation can put future revenue streams in jeopardy if the system is prevented from delivering its full capacity for the expected period of time. Understanding and managing risk to the various parties is critical to hitting financial model targets and ensuring the success of the project.
This poster will help investors, analysts, engineers, and public officials evaluate new energy storage projects from a variety of perspectives and support development of safe, economical, and effective installations.