The idea that giant batteries may someday revolutionize electrical grids has long enthralled clean-power advocates and environmentalists. Now it’s attracting bankers with the money to make it happen.
Lenders including Investec Plc, Mitsubishi UFJ Financial Group Inc. and Prudential Financial Inc. are looking to finance large-scale energy-storage projects from California to Germany, marking a coming-of-age moment for the fledgling industry. The systems help utilities solve a longstanding clean-power conundrum: managing the unpredictable output from wind and solar farms, and retaining electricity until it’s needed.
Battery costs have declined 40 percent since 2014 and regulators are mandating storage technology be added to the grid. That’s encouraging utilities to offer longer contracts and developers are expected build $2.5 billion in systems globally this year. These trends are changing the risk profile, giving lenders confidence in batteries in much the same way that power-purchase agreements opened banks’ doors years ago for wind and solar power.
“Having big money come in is the first step to widespread deployment,” Brad Meikle, a San Francisco-based analyst for Craig-Hallum Capital Group LLC, said in an interview.
A handful of lenders have already backed storage deals. Prudential helped finance two 20-megawatt systems in 2015 that Renewable Energy Systems Americas Inc. built in Chicago. CJF Capital LLC and SUSI Partners AG backed a 12-megawatt portfolio of storage projects last year in Canada. More are on the horizon.
“As you get into the latter half of this year, you’ll start to see a pick-up of activity,” Ric Abel, a Prudential Capital Group managing director, said in an interview.
The new crop of battery suppliers includes companies with more resources and deep pockets. Tesla Inc., LG Chem Ltd., Samsung SDI Co. and Panasonic Corp. are giving lenders confidence that grid-scale energy storage is a bona fide industry. At the same time, the number of projects have surged around the globe, giving banks a broad choice of deals.
“We’ve had conversations with financing houses going back four or five years,” John Zahurancik, the Arlington, Virginia-based president of AES Corp.’s storage division, said in an interview. “They’ve gotten comfortable with the components. Now that the deal flow is increasing, I think it is starting to attract more attention.”