The importance of project finance to energy storage

(You can also read The Relevance of Energy Storage to Project Finance.)

When it comes to energy storage, and especially battery system design, it is important to understand the influence upon design and engineering by the world of project finance. Three top areas are understanding risk, design for manufacturing, and market access.

  1. Understanding risks As battery systems mature beyond demonstration hardware, there are several factors of risk allocation and mitigation for a project which influence battery system design. The most critical in my view are operational risk (and performance guarantees), supply risk, construction risk (and costs), and inflation risk. (see The World Bank on
    Risk Allocation, Bankability and Mitigation in Project Financed Transactions)
  2. Design for manufacturing Battery systems in demonstrators can be subject to cost reduction and manufacturability efforts after implementing or completing a demonstration project. This can have important impacts on the bankability of an energy storage system. (a) Are the changes substantive enough to warrant new years of demonstration to prove out the performance to support performance guarantees? (b) What design work is taking place, upfront, in the battery system design to address cost and manufacturing so these delays can be avoided? (c) Is it possible to understand the impact of changes early and confidently assess the need, or lack thereof, for further long-term testing and demonstration? Answers: (a) Usually. (b) Limited to none in many cases. (c) Absolutely.
  3. Market access There’s electric vehicle traction batteries, residential energy storage, and then commercial/industrial and utility-scale battery systems.  Deploying these energy resources on or off balance sheet requires a constructive interplay of financial and battery engineering and design.

Keep reading the blog, ask me questions in the comments or via email. I’ll do my best to share insights about these and other areas of battery system design.

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