C&I Corporations Gain New Financing Option for Utility-Scale Storage Development

(Credit: LevelTen Energy)

by | Dec 17, 2020

(Credit: LevelTen Energy)

LevelTen Energy has unveiled what it is calling a new type of financial contract that gives corporations easier access to energy storage projects. The agreement, developed in collaboration with EnergyGPS, provides buyers a practical way to contract with storage developers in a way that simplifies the storage procurement process and increases buyers’ options “by orders of magnitude,” LevelTen Energy says.

The Re-Store Energy Agreement was designed with the flexibility to either complement a renewable energy power purchase agreement (PPA), whether existing or planned, or to be executed independent of any particular energy generation project or PPA, according to the company.

The announcement comes a week after Starbucks announced it had entered a combined Virtual Power Purchase Agreement (VPPA) and Virtual Storage Agreement (VSA) that will provide renewable energy — via solar energy and utility-scale batteries — for more than 550 stores in California, facilitated by LevelTen Energy.

One key benefit of the Re-Store Energy Agreement is that it reduces portfolio volatility, the company says. Because the economic value of storage is often inversely related to that of a renewable energy PPA (in that it has a tendency to perform well — or generate a positive cash flow — when a PPA contract does not, and vice versa), the Re-Store agreement can serve as a hedge, complementing existing renewable energy contracts and reducing the cash flow volatility of a buyer’s energy portfolio. The agreement is particularly effective in markets with high (or rapidly increasing) renewable energy penetration.

The Re-Store Energy Agreement also reduces operational risk, the company says: the developer receives a guaranteed, fixed revenue stream and, in exchange, pays the buyer the difference in value between the highest and lowest hourly prices that occur in the wholesale energy market each day. But because the agreement is a purely financial contract, buyers don’t take on the technology risk or operational responsibilities of a more conventional storage procurement. Instead, buyers receive payments based on how an optimized storage project should have performed, not based on actual performance, while also avoiding accounting triggers.

Additionally, because the Re-Store Energy Agreement is not tied to a physical location, the storage project doesn’t need to be co-located with an energy generation project. This structure allows buyers to select storage projects with the best economics, rather than simply accept the storage project that happens to be co-located with their renewable energy project.

LevelTen says the agreement opens the door to billions of dollars of investment in large-scale energy storage projects.

The offering comes at a time when the cost of utility-scale storage has plummeted. While many utilities and load-serving entities are investing in storage to support their operations, the industry has “thus far lacked the transaction infrastructure to deliver reliable value streams to both storage buyers and storage owners,” says Bryce Smith, CEO of LevelTen Energy. The Re-Store Energy Agreement “closes this gap by delivering a guaranteed revenue stream to developers, which is key for project financing,” he says.

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