"When you look at how to monetise a battery, you have various options depending on where your battery is located in the power system, including whether it's co-located with other forms of generation such as renewables. The most common methods are arbitrage and ancillary services. To finance battery energy storage projects, stable, certain and long-term revenues are key but some of these revenue streams are uncertain or by themselves insufficient to justify the up-front capital investment. By combining multiple revenue streams together [stacking], developers and investors can significantly improve the financials of their project and improve its ability to obtain third party debt finance at a higher gearing.
"To mobilise private investment, including debt finance, you also need a robust regulatory framework. As with many new technologies, often existing regulations are not future proof and need to be updated to accommodate new technologies. For batteries, which can perform multiple roles with an electricity network, updated regulatory frameworks which account for these different roles play an important part in streamlining licensing and permitting requirements, simplifying the process and shortening development timelines.
"Another general problem for renewable energy and battery energy storage systems in Asia, is that a lot of the local markets do not operate a single pooled and open electricity market. You often have a single, state-owned entity, responsible for most, if not all, of a country's generation, transmission and distribution to whom all power generated in-country must be sold. This largely monopolised form of power market significantly reduces the opportunity for viable private investment into renewable generation and storage projects and precludes the development of corporate/commercial and industrial offtake markets, which can assist in underpinning the development of these projects and increase their penetration in local grid systems. It's something we see as crucial for the development of renewables markets generally but also battery energy storage systems. You can see this combination of factors play out when you compare India and Australia, which both have a high degree of penetration of renewables and battery energy storage projects, compared to many other countries around the Asia-Pacific region."
Financing battery storage projects – Pick your playbook
HSF partner Rupert Baker breaks down the legal, regulatory and funding factors shaping marquee power projects
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Combining multiple revenue streams lets developers significantly improve the financials of battery projects and improve their ability to obtain debt finance.
