A growing number of big power-plant developers are sold on energy storage. That doesn’t mean they love the deals they see.
Big power plant developers are increasingly convinced they should be investing in battery projects in the United States. The challenge is finding investments that will pay off.
After years of promise, energy storage is finally on the cusp of blossoming into a multi-gigawatt annual market in the U.S. But the industry’s rapid takeoff means there may not be a “honeymoon period” for investors like there was in the earlier days of wind and solar, developers say.
From PacifiCorp to NV Energy, a growing number of major American utilities are drawing up aggressive plans to add storage capacity. Even in deregulated power markets like Texas, the falling cost of batteries is rapidly opening up new opportunities for storage.
Power plant developers including NextEra Energy Resources and Southern Power are moving quickly to take advantage of this new market, whose value is expected to surge tenfold from 2018 to 2023, rising to $5 billion annually, according to Wood Mackenzie.
Southern Power, the independent generation arm of utility Southern Company, has “shied away” from large-scale solar projects in recent years due to questionable returns, said Phillip Adams, development services manager.
But the company continues to spend half a billion dollars a year investing in new wind farms, and it owns more than 3 gigawatts of renewables capacity. Last summer, Southern Power formed a partnership with battery developer esVolta that could see it investing in four California storage projects totaling up to 86 megawatts/345 megawatt-hours.
“What I’m really excited about right now is energy storage,” said Adams, speaking onstage last week at S&P’s Power and Gas M&A Symposium in New York.