Energy Storage Financing: A Roadmap for Accelerating Market Growth

Posted: August 26, 2016 - 15:00 / Project Finance / Reports

Project financing is emerging as the linchpin for the future health, direction, and momentum of the energy storage industry. Market leaders have so far relied on self-funding or captive lending arrangements to fund projects, along with support from government grants (e.g., the American Recovery and Reinvestment Act Energy Storage Demonstration Projects as well as state grants). New lenders are proceeding hesitantly as they lack a full understanding of the technology, business, and credit risks involved in this rapidly changing market. The U.S. Department of Energy is poised to play a critical role in expanding access to capital by reducing the barriers to entry for new lenders, and providing trusted analytical benchmarks to better judge and price the risk in systematic ways. A Roadmap based on the needs of the market can provide a series of steps to extend relevant work already underway, and then build on that to give financial industry participants an analytical framework and the tools to develop acceptable contracts to enable successful project development activity.

For many years, the energy storage industry has made great progress in developing the technology, standards, public policy and market rules that has formed the basis of today’s market. These elements have led to the expanding opportunities for energy storage that now seem almost limitless—but in reality those opportunities are severely inhibited by the lack of available and cost-effective capital. The low level of understanding and discomfort of lenders on these issues is preventing many from making an informed and timely decision as to which project to back.