Revenue Prospects and Tax Credits Fuel Surge in Funding for Standalone Storage Projects: The shift towards standalone battery energy storage systems (BESS) is primarily driven by their higher revenue potential compared to co-located systems. Co-located BESS often face limitations in participating fully in revenue-generating activities such as arbitrage and ancillary services when they are constrained to charge from their co-located generators. Additionally, BESS systems can provide the most grid benefits when located away from areas with strong renewable resources. Furthermore, the recent amendment to the tax credit criteria, by the Inflation Reduction Act, now allows standalone systems to qualify for the 30% Investment Tax Credit (ITC) incentive, which was previously only available to co-located systems.
Texas and Arizona Spearhead Standalone System Financing; California and Utah Champion Solar+Storage Funds: In Texas and Arizona, extreme temperatures and the rapid expansion of renewable energy sources have led to a surge in demand for ancillary services, making these states the highest in the US in terms of demand for standalone grid-serving systems. As a result, major developers such as Plus Power, Aypa Power, and Broad Reach Power have been investing in projects in these regions, generating substantial revenues for their systems. Additionally, California and Utah have seen an increase in the number of co-located solar projects securing financing in 2023. This is due to factors such as priority in grid connection approval, reduced approval costs, and greater dispatch flexibility, which have incentivized companies like Clearway Energy and Leeward Renewable to finance their co-located assets in these areas.
The above analysis is proprietary to Enerdatics’ energy analytics team, based on the current understanding of the available data. The information is subject to change and should not be taken to constitute professional advice or a recommendation.
Click to know more about Enerdatics' Renewable Energy M&A, Finance, PPA, and Projects databases.