Renewable Energy Finance: Debt financing for battery assets in the US crosses $1.2bn YTD 2023, with PE-backed companies leading the activity

published on 01 August 2023

EnCap Investments-backed Broad Reach Power secured $435mn in credit facilities to facilitate the development of seven independent battery energy storage systems (BESS) in Texas and California, with a combined capacity of 880 MW. The move underscores the current trend of private equity (PE)-backed companies securing debt capital to support their ambitious expansion strategies.

So far in 2023, PE-backed firms have dominated the sector by securing more than 45% of the total debt capital raised for BESS assets in the US. Notably, NineDot Energy (backed by Carlyle Group), Jupiter Power (sponsored by BlackRock), and Hecate Energy (portfolio company of InfraRed Capital) have secured hundreds of millions of dollars in capital to build out their portfolios. This trend highlights the growing confidence in stand-alone BESS as a lucrative investment, primarily due to their capacity to generate attractive returns through a combination of ancillary services and PPAs. Project economics are further enhanced by the introduction of the investment tax credit (ITC) for storage systems, under the IRA. 

A partner at Arclight Capital recently emphasized that their investment in the battery storage platform Elevate Renewable is anticipated to yield a mid-to-high teens rate of return, surpassing more than double the average reported returns for unsubsidized renewable energy assets of 6-8%.

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.

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