Energy
Making energy storage more financeable
Approach
Market developmentDate
October 5, 2023Reading time
4 minutesThe rapid increase in generated wind and solar energy is causing energy systems to undergo significant change. Due to the variability in the supply of renewable electricity (the amount of wind and sun varies by the hour), flexibility on the power grid is of great importance. Storage solutions such as batteries play a key role in this. In the market for Energy Storage Systems (ESS), innovation is therefore thriving, both in technologies and in business models.
SemperPower approached Invest-NL with a request for assistance regarding the business case for energy storage, which was not yet financeable due to a lack of market knowledge among financiers. It appeared that financiers were not comfortable with the market risk caused by uncertainty over future additional grid capacity.
Electrification as a driver of the transition to a carbon-neutral economy
Making the transition to a carbon-neutral economy financially feasible is Invest-NL's top priority. Electrification of energy systems using sustainable sources plays an important role in this. It requires innovation, entrepreneurship, and an active involvement of many different parties from the entire (energy) chain. To accelerate this transition, Invest-NL has already financed and/or made various companies and projects financeable.
Read more about what we do for the energy transition.
Innovative companies and entrepreneurs actively working on smart storage solutions
In the Netherlands, a significant number of companies and entrepreneurs are working on groundbreaking ideas to promote further electrification of our energy system using batteries. Often, their solutions are so innovative—and therefore risky—that scaling up and financing are challenging. Currently, most battery operators offer their product to a single specific tenant, who then operates the battery themselves. This business model is financable when the tenant is creditworthy.
However, to make more effective use of battery storage capacity, operators prefer a business model where the battery capacity is divided into separate parts, allowing revenue to be generated from different markets. This is known as ‘revenue stacking’ in the market. Wind and solar parks, grid companies, and industrial consumers can then rent out parts of the capacity in advance and deploy them flexibly when it suits them best. In this accompanying business model, the battery owner remains responsible for operational deployment. It is important that all customer agreements are carefully documented in advance. The standard contract developed by SemperPower and Invest-NL makes this possible.
For SemperPower, the Invest-NL process has contributed to the further development of our company. The capacity withdrawal contract, also known as a ‘tolling agreement’, provides both capacity purchasers and financiers with clarity regarding the earnings, costs, and feasibility of an energy storage system.
Dennis SchirickeFounder & CEO at SemperPower:
Where Invest-NL makes the difference in this case
Together with SemperPower, Invest-NL has developed a standard contract that allows battery operators to offer their storage capacity to multiple providers of renewable energy across different markets. This increases the revenue per installed battery and makes new technologies and business models in the energy transition financable.
The ‘First Time Right’ programme (FTR) developed by Invest-NL has been implemented to remove this financing bottleneck. FTR enables specialised advisors and legal professionals to assist in finding customised solutions. Through the FTR, a model agreement has been developed in this case that can be concluded between (different) users of the storage capacity and the battery operator. This agreement can then be used to provide financiers of the battery with security (including as collateral), making the ‘multi-use’ battery more financeable.
We notice that there is a high demand in the market for resolving financing bottlenecks related to risky, innovative business models. Now that this standard agreement is available, we will support market parties in its use. In this way, we offer an investor-ready solution to companies and entrepreneurs who can then submit a financing application to financiers such as Invest-NL.
Diederik PharmacistSenior Business Development Manager at Invest-NL
Questions about this topic? Diederik is happy to help.
Diederik Apotheker
theme expert Next Generation Power
