A unit of Macquarie Group Ltd. tapped CIT Group Inc. to finance part of a $200 million portfolio of energy-storage systems it’s developing in California, marking the largest battery project to get bank financing.
The 50 megawatts of storage systems are being installed at commercial and industrial sites in Los Angeles and Orange counties, according to Michael Silverton, head of Macquarie Capital for the U.S. and Latin America. The companies didn’t say how much financing CIT is providing.
Macquarie, the world’s biggest manager of infrastructure assets, acquired the projects in August from Advanced Microgrid Solutions LLC. The two companies are developing them jointly, and the project will go into service in phases over the next 12 to 24 months.
Large-scale batteries have been long considered the missing link to fully integrate solar and wind power into electric grids, but lenders have been slow to finance projects, in part because the systems have lacked reliable revenue streams. That’s changing as costs fall and technology improves, giving utilities confidence to offer storage developers long-term contracts.
“There are a lot of eyes on this sector,” Macquarie Capital Senior Vice President William Demas said in an interview. “This is the first of billions in financings that will happen over the next couple of years.”
Revenue Streams
Macquarie’s project — using Tesla Inc.’s Powerpack 2 lithium-ion batteries — will have three separate revenue streams.
The facilities that install the systems — including California State University, Long Beach and the Irvine Co. — will pay to store power from solar panels, lowering their energy costs when prices spike and manage overall electrical use. The utility Southern California Edison, meanwhile, has agreed to buy power from the systems under 10-year capacity contracts as part of its plan to modernize the grid by 2022. And the batteries will offer services to the grid, including reserve capacity and voltage management.
CIT is among a handful of lenders — including Investec Plc and Prudential Financial Inc. — that have been looking to finance storage projects as developers push to build $2.5 billion in systems globally this year.