Can you finance a battery storage project?

Energy can be stored in a number of ways, depending on the source, but the most common is in chemical batteries. In this briefing, we look at some of the considerations for financing battery storage projects. Why chemical batteries? They are easily scalable.

Why is project finance difficult for energy storage?

It has traditionally been difficult to secure project finance for energy storage for two key reasons. Firstly, the nascent nature of energy storage technology means that fixed income lenders and senior debt providers are naturally risk averse.

Why is energy storage investment restricted?

The traditional approach to energy storage projects has restricted investment because it requires financiers to carry out significant due diligence whenever they fund a scheme – because of this, most energy storage investment has historically been off balance sheet or via specialist funds.

How does battery storage financing work?

Battery storage financing structures usually involve a greater proportion of equity funding than would be typically seen on a renewables project and a shorter tenor of facility. Cash sweep mechanisms are often seen, to ensure that free cash is used to repay debt.

Are government subsidies for battery storage a viable revenue stream?

Uncertainty and complexity of revenue streams The available government subsidies for battery storage in the UK do not currently form a sufficiently significant and stable revenue stream to ensure battery storage project financings are fundable on the basis of capacity market or ancillary services alone.

Why is energy storage important?

The ability to store electricity that is produced by renewable energy projects is crucial to maximising efficient energy use and securing the UK's energy supply in the face of global upheaval, as well as accelerating the transition to net zero.