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International arbitration report
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Energy Storage Updater: June 2020
Global | Publication | June 2020
Content
Financing solar-plus-storage in the United States
Norton Rose Fulbright recently assisted with the financing for the world’s largest operational solar-plus-storage system located in Hawaii. We have also worked on financings for distributed-scale projects, comprising portfolios of rooftop solar systems and batteries. These projects present unique contractual, regulatory and legal issues. Here we share three key takeaways for financing solar-plus-storage projects in the US.
- Performance guarantees and warranties from creditworthy counterparties are a must for addressing key technology risks.
- The owner takes on more risk if the project lacks a full-wrap EPC contract.
- Contracts should adhere to ITC rules if the project relies on tax equity financing.
Read the main article.
Technology and corporate news
Global
RedT rebrands as merger completes, raising £155k from its open offer
Vanadium redox flow battery company redT has officially rebranded to Invinity Energy Systems following its merger with Avalon. The combined company will be active Europe, North America, Asia, Australasia and Africa (further details here). RedT also revealed the results of its open offer, raising £155,231 of a possible £6.3m. It is also reported that redT has signed a financing partnership with Bushveld to support the Energy Superhub Oxford.
BNEF reported that the levelized cost of electricity of battery storage systems has halved in just two years to a benchmark of US$150 per MWh for four-hour duration projects, making batteries cheaper for peak shaving than open cycle gas turbines (OCGTs). The report notes that manufacturing scale and standardization, as well as technology improvements, have contributed to this rapid decline in costs. The other factor is that battery projects are getting bigger, both in megawatt (MW) and in megawatt-hour (MWh) metrics. However, longer duration energy storage is not yet competitive, as the cost of batteries, typically lithium-ion, increases rapidly with the discharge duration, meaning that OCGTs are still cheaper for peak shaving for three to five hours.
Africa and the Middle East
Nusaned Investment, based in Riyadh, Saudi Arabia and owned by SABIC, and SCHMID Group closed a joint venture (JV) to build manufacturing and technology in the field of vanadium redox flow batteries. The JV plans to build a manufacturing facility in Damman with 3 GWh annual production capacity. The facility will produce energy storage systems to be utilized for renewables capacity grid integration, establishment of mini-grids, optimization of diesel generator capacity and power backup. Its products will be offered under the EVERFLOW brand. The Riwaq Industrial Development Company will join the joint venture as an additional investor and shareholder.
Iberdola plans to build a wind farm with 13.125 MW of installed capacity combined with a 12 MW lithium-ion battery storage system, as well as a separate 5.5 MW solar photovoltaic project on Tenerife in the Canary Islands. Iberdola has submitted applications for both projects to the island’s energy authority.
Azelio opens renewable energy storage system in Morocco
Azelio has completed the installation of an energy storage system in Morocco’s Noor Ouarzazate solar complex as part of a joint technical and business development agreement with the Moroccan Agency for Sustainable Energy. The system is designed to store energy from solar and wind power and make it available in the form of electricity and heat at every hour of the day using recycled aluminium as a storage medium. The energy storage system is scalable from 100 kW to 100 MW. Azelio expects commercial installations to start in late 2020 and volume production in 2021.
Scottish start-up in gold mine energy store plan
Gravitricity, a Scottish energy storage start-up, received £300,000 from the UK government agency Innovate UK to explore the potential of South Africa’s mineshafts as energy stores. Gravitricity’s energy battery works by raising multiple heavy weights totalling up to 12,000 tonnes in a deep shaft and releasing them when energy is required. It is calculated that this system can store energy at half the lifetime cost of lithium-ion batteries.
Asia Pacific
RES, Energy Estate to collaborate on 2 GW renewables hub in Queensland
RES has teamed up with Energy Estate to develop a 2-GW-plus hybrid project that will bundle wind and solar storage and new transmission infrastructure near Gladstone, Queensland. The new plants will be strategically located within the Fitzroy Renewable Energy Zone and are expected to be delivered over the next ten years.
UNSW hydrogen storage technology to debut at community solar farm
Hydrogen storage technology developed at University of New South Wales (UNSW) will be installed in the regional town Manilla, which is set to be one of Australia’s major community-owned solar farms. It will be backed by an NSW government grant as part of an over A$15m funding round from the state government’s Regional Community Energy Fund that has awarded seven solar and battery community projects across NSW.
The Asian Development Bank has approved a US$100m loan to help supply renewable energy to Mongolia by installing its first large-scale advanced battery energy storage system. This will help decarbonize the country’s energy system by increasing the penetration of renewable energy. The battery project capacity is 125 MW, making it among the largest systems globally.
Asian Development Bank signs US$7.2m loan for Thailand wind-plus-battery project
The Asian Development Bank (ADB) has signed a deal for its first financing of a combined wind energy and battery storage project in Thailand, which also doubles up as the nation’s first private sector initiative to blend the two technologies on such a large scale. The ABD will finance ฿235.55m (US$7.2m) for the construction of the Southern Thailand Wind Power and Battery Energy Storage Project, which includes integrating a 1.88 MWh battery energy storage system with an existing 10 MW wind farm.
Sungrow selected for China “landmark” 202 MW / 202 MWh ultra-high voltage PV-plus-storage plant
Sungrow is to partner with Huanghe Hydropower on providing PV inverter and energy storage systems for a major 202.86 MW / 202.86 MWh solar-plus-storage project in the Qinghai Province, China. The project has been described as a landmark for the country as it is the first to pass functionality tests in controlling both solar PV and energy storage system output.
Europe
Netherlands to receive world’s biggest energy storage system financed by crowdfunding
NEC Energy Solutions has been awarded a contract to deliver the GIGA Rhino energy storage project, to be located at the Wageningen University and Research test center in the Netherlands. When completed, GIGA Rhino is expected to provide grid resilience for approximately 5,000 homes. A crowdfunding drive raised US$4m towards the project’s construction and operation, making it the largest battery storage installation to have been funded primarily by means of crowdfunding. The project will be used to balance the local smart grid, and for frequency containment reserve and imbalance and curtailment services.
Shell and Gasunie plan to build a green hydrogen plant in the Netherlands and expect to start a feasibility study this year while looking for other industrial and energy partners. Once operational, the plant is expected to produce 800,000 metric tons of hydrogen by 2040. The companies envisage the plant receiving renewable power from 3 GW of offshore wind, possibly rising to 10 GW by 2040. This will then be converted into hydrogen by electrolysis and stored for reconversion into power or for direct industrial use. The project is in the early stages and, amongst other things, depends on securing project partners, government permits, the assignment of new wind farm locations in the North Sea and the availability of Dutch and European subsidies for green energy.
Total to construct France’s largest battery storage system
Total has announced plans to build France’s largest battery storage system in the Dunkirk port district. Due to start commissioning later this year, the system will provide fast reserve services to support the stability of the French electricity grid. It will be based on Saft’s Intensium Max 20 High Energy solution and is expected to have a storage capacity of 25 MWh and power output of 25 MW.
Zenobe is testing reactive power services to National Grid in Great Britain
Zenobe Energy is to provide 10 MW of battery storage to provide reactive power services to National Grid Electricity System Operator via UK Power Networks’ (UKPN) distribution network as part of the Power Potential project. The project will be undertaken in partnership with UKPN and is expected to generate up to an additional 4 GW of energy on the grid by 2050.
Penso Power has secured approval for a 50 MW expansion of its 100 MW Minety Battery Storage project near Swindon in the UK, reported to be the largest of its kind in Europe. The 100 MW project started construction last year and is expected to enter operation in autumn this year. The additional 50 MW is expected to enter operation in 2021. Penso Power has an offtake agreement for the original 100 MW as well as commercial agreements with an energy aggregator to optimize revenues. It is in discussions with potential offtakers regarding similar arrangements for the 50 MW project extension.
Tesvolt is supplying energy storage containers offering a total capacity of 2 MWh for Europe’s largest electric car charging park at the Kreuz Hilden junction. The charging park will host a total of 114 charging stations, with power sourced partly from a large rooftop photovoltaic installation above the park. These Tesvolt containers were selected due to their efficient charge and discharge capabilities and their high life expectancy of around 30 years. The federal state of North Rhine-Westphalia will cover a portion of the investment costs as part of its progres.nrw funding scheme.
Northvolt and Vattenfall launch Mobile Battery System capable of patching up grids
Swedish battery maker Northvolt and state-owned utility Vattenfall launched a new modular mobile energy storage system. Units of 250 kWh can be packaged into hubs capable of parallel connections. These systems aim to alleviate grid issues due to Sweden’s rapid drive for electrification and strict permitting requirements for upgrades and new connections. Northvolt is currently building its first battery gigafactory in Sweden and obtaining permits for a second factory in Germany.
Hitachi to bankroll UK chain of solar-powered supercharging stations
Hitachi Capital increased its investment in UK-based Gridserve from the existing £5.6m to “tens of millions” according to a Gridserve’s spokesperson. Gridserve develops subsidy-free solar-plus-storage plants alongside a network of EV infrastructure The company aims to establish 100 charging sites across the UK by 2025 and is currently developing its next two solar farms.
Sumitomo buys large stake in energy storage specialist Highview Power
Sumitomo Heavy Industries invested US$46m in Highview Power and became its largest minority shareholder. The investment puts the company’s valuation at US$330m. It will contribute to the commercialization of a cryogenic energy storage project by the company which has two pilot plants currently operating in the UK.
Sonnen: Latest German VPP’s use of blockchain “proves energy storage can solve grid congestion”
Sonnen’s virtual power plant project in northeast Germany adopted a digital exchange platform that utilizes blockchain technology to match surplus wind energy generated with available capacity in Sonnen’s battery systems. These systems act together as one large-scale storage system that reduces overloading and congestion in local power grids. Sonnen’s customers can sign up to participate by making their battery systems available; in return they pay a monthly flat rate for electricity.
North America
Blackstone buys Canadian battery storage firm NRStor C&I
An energy-focused private equity unit of American investment group Blackstone has acquired Canadian battery storage solutions company NRStor C&I LP (NRStor). NRStor has a 200 MWh portfolio which includes operational, in-construction and contracted energy storage projects. The acquisition provides NRStor an opportunity to speed up its expansion and further enhance its position as a “market leader” in energy storage in Ontario.
Japan's Itochu to invest US$3.7m in Canadian energy storage company Eguana
Calgary-based energy storage systems developer Eguana attracted a C$5m (US$3.7m) in investment from Japan’s Itochu Corp (Itochu). Eguana raised the funds by offering unsecured convertible debentures and warrants which, if converted, would give Itochu a 14.1 percent stake in Eguana. Itochu and Eguana have an existing relationship related to the integration of a proprietary AI software with Eguana’s Evolve platform, with a view to offering a new product certified with a full suite of virtual power plant (VPP) features supporting fleet aggregation and residential applications.
Ontario’s Georgian College aims to offset its peak hours grid use and energy costs using Wärtsilä’s 2 MW / 5.4 MWh GridSolv energy storage system. Deploying the storage system will decrease the college’s Global Adjustment charge, a fee billed to all hydro customers in the province under Ontario’s Green Energy Act 2009, which is typically 60 percent of the college’s total electricity bill. The storage is expected to be delivered, installed and commissioned in autumn of 2020.
Southern California Edison contracts huge storage portfolio to replace gas plants
Southern California Edison has executed seven contracts to procure a total of 770 MW in grid-scale battery projects, representing one of the largest single procurements of its kind (notably topping the 2019 US storage market by over 200 MW). These projects will be key when it comes to replacing the grid capacity that is currently provided by four gas plants the grid currently relies on which have been ordered to close in part due to their detrimental environmental impact.
Hawaiian Electric picks winners in solar-storage bonanza
Hawaiian Electric (HECO) selected 460 MW of solar capacity and nearly 3 GWh of solar-storage projects in the largest renewables procurement in Hawaii’s history. Storage projects will be key for the state as it progresses towards its goal of 100 percent clean energy by 2045. This RFP is intended to help HECO replace two major power plants: a 180 MW coal-fired power plant on Oahu and a 3.76 MW oil-fired power plant on Maui, set to close in 2022 and 2024 respectively.
Long duration breakthrough? Form Energy’s first project tries pushing storage to 150 hours
Form Energy and Minnesota utility Great River Energy are joining forces to deploy a 1 MW / 150 MWh pilot project in Minnesota. The project harnesses long-duration storage that Form Energy says can significantly outlast its lithium-ion battery utility-scale counterparts currently deployed. Great River Energy intends to phase out its remaining coal sources and replace those with renewable energy sources, making long-term storage solutions key to future business operations.
World-first green hydrogen and storage plan to help turn Los Angeles 100-percent-renewable
The Los Angeles Department of Water and Power (LADWP) plans to use green hydrogen as an alternative to fossil fuels in an effort to achieve its aspiration of 100 percent renewable energy by 2045. The Intermountain Power Project (IPP) in Utah, which is the last remaining LADWP coal plant, will host the project site. The planned storage project will have the capacity to store renewable hydrogen for months at a time and will claim its spot as the world’s first power plant capable of harnessing clean renewable hydrogen power. The unique salt dome will permit the storage of renewable hydrogen in over 100 caverns, each one as big as the Empire State Building, resulting in a potential capacity of 100,000 MWh.
Latin America and the Caribbean
Azelio pairs with Chile's VOGT to offer energy storage for LatAm mines
Swedish thermal energy storage developer Azelio and Chilean industrial equipment supplier Industria Mecanica VOGT (VOGT) have signed a memorandum of understanding to collaborate on a new storage offering for the mining industry in Latin America. VOGT currently supplies pumping systems for mining companies in Latin America. The pumping systems require electricity around the clock and are powered by diesel generators in off-grid locations. The companies plan to replace the diesel component with Azelio’s long-duration energy storage systems paired with solar PV.
Equinor buys stake in Micropower
Norwegian company Equinor has acquired a minority stake in Brazilian battery storage and solar distributed generation company Micropower. Equinor is acquiring the shares through its US$200m corporate risk fund Equinor Energy Ventures Fund BV. Micropower develops storage and other flexible low-carbon solutions for the commercial and industrial energy segment in Brazil.
Policy and regulatory news
Africa and the Middle East
Government of Jordan confirms cancellation of tendering for a 30 MW / 60 MWh energy storage system
The government of Jordan cancelled the tendering for the concession of a 30 MW / 60 MWh grid-scale standalone energy storage system that would have helped to integrate the output of several large-scale solar PV plants. The tender was announced in February 2018 and 23 companies had qualified as eligible.
Asia Pacific
Australian government pledges A$70m to accelerate green hydrogen production
The Australian Renewable Energy Agency (ARENA) has launched the A$70m Renewable Hydrogen Deployment Funding Round as it seeks to bring down the cost of renewable hydrogen. The federal-government-backed funding, one facet of the country’s National Hydrogen Strategy, aims to deliver on ARENA’s ambitious “H2 under $2” proposal, an initiative focused on producing hydrogen by electrolysis at under a cost of A$2 per kg. ARENA has confirmed that the funding will support at least two large hydrogen projects.
Solar Energy Corporation of India extends deadline for solar-plus-storage bid submissions
The Solar Energy Corporation of India has extended its bid submission deadlines for a number of solar and co-located battery storage projects. These include tenders for two 7 MW solar PV facilities with 21 MWh of battery storage in the Ladakh region and for a 4 MW solar floating solar PV power plants combined with battery storage at Kalpong Dam in North Andaman.
Europe
Greece to set up energy storage framework
Greece is preparing to establish an energy storage framework that will allow the country to reach its renewable energy goals set in the recent national energy plan for 2030. On a webinar hosted by the national energy regulator (RAE) and attended by ministers, Stavros Papathanasiou, a professor in the NTUA school of electrical engineering, argued that Greece will need about 1,500 MW to 1,750 MW of new energy storage capacity in order to meet 60 percent of its 2030 electricity needs via renewable energy. This will require a combination of large pumped hydroelectric energy storage systems with smaller battery storage systems. If the framework is delivered, it might unlock pumped hydro opportunities in Greece such as the Amfilohia Pumped Storage Project, an EU Project of Common Interest developed by Terna Energy.
The Spanish government has announced plans to hold a public consultation on the role energy storage and hydrogen should play in its national energy mix over the next ten years. The Ministry for Ecological Transition and Demographic Challenges expects the consultation will open once the COVID-19-induced state of emergency declaration has been lifted. Spain is implementing a National Energy and Climate Plan 2021-2030, which will inform policy in line with its climate commitments as an EU Member State. The ministry has said it sees energy storage as a key means of decarbonizing its energy system, both as a way of better integrating renewable energy technologies and allowing individuals to generate and store their own power.
“No subsidies please”, says Europe’s struggling energy storage sector
To date, Europe's successes in energy storage have come from tenders to provide frequency response and other grid services. But those needs have largely been met; prices have fallen. Industry experts argue that subsidies are not the answer. Instead, some maintain that growth of energy storage should be promoted by opening up its route to the market; energy storage technology currently faces barriers to its full participation in the market due to regulatory hurdles, such as double charging and a failure to recognize storage in regulations.
UK government to introduce “carbon threshold” for capacity market
The UK’s Department for Business, Energy and Industrial Strategy has outlined long-awaited changes to the Capacity Market auction system in the UK, including allowing demand-side response technologies to bid for contracts with a duration of up to 15 years, rather than the current one-year limit. The reform will also introduce reporting and verification mechanisms that place carbon emission limits on all contracted technologies which existed before July 2019.
Incentives for small solar-plus-storage in Austria and Italy
The Austrian government is now offering rebates to homeowners and businesses willing to couple small solar systems with energy storage. The €36m program will dedicate €12m to energy storage with the remaining two-thirds to subsidize rooftop PV systems. The government of Italy’s Lombard region has also set up a €10m fund for a similar scheme, under which public bodies can apply for a 50 percent rebate on the purchase of solar-plus-storage systems or the entire cost of storage systems bought to be installed alongside operational solar arrays.
An auction for 700 MW of grid energy capacity in Portugal is being opened up to bids from hybrid solar-plus-storage projects in additional to pure solar projects. The technologies will participate on a competitive basis and be compensated equitably, with guaranteed payments for energy storage co-located projects to use a capping mechanism in the event of price spikes. Though the auction was paused due to the COVID-19 pandemic, energy state secretary João Galamba has said that it will launch as soon as the market is ready to participate.
A Capacity Market auction in France has awarded seven-year contracts to 253 MW of energy storage, along with 124 MW of demand response capacity. Companies benefitting from these awards include TOTAL FLEX, NEOEN and CSE Volta, among others.
Ofgem ends double charging for battery storage: What are the implications?
Ofgem announced its approval of a modification to the Connection and Use of System Code (CUSC) that will mark the end of double-charging for energy storage installations in the UK. The change will mean that energy storage assets will only pay Balancing Services Use of System (BSUoS) charges on the power they export rather than on both imports and exports as has previously been the case. These changes come into effect in April 2021.
European grid operators launch blockchain-based flexibility platform
A new, blockchain-based flexibility platform has recently been launched by three European Transmission System Operators (TSOs), Swissgrid, TenneT and Terna. The platform, called Equigy, allows small consumer-based assets, such as residential energy storage batteries and electric vehicles, to play a role in grid-balancing. Consumers can earn money by changing their interaction with the electricity grid via an aggregator. TSOs expect this will allow greater integration of intermittent renewables by increasing their own ability to balance generation through flexibility. Currently the platform is launching in the Netherlands, Germany, Italy and Switzerland.
North America
Alberta Utilities Commission approves 13.5 MW solar-plus-storage project as “in the public interest”
In April 2020, the Alberta Utilities Commission approved a solar and battery storage project combining 13.5 MW of solar generation with 8 MW / 8 MWh of batteries in a rural area of the province. The project will act as a technology demonstration for their suitability in the area. The project will be partially funded through the local authority’s Emissions Reduction Alberta program. This will be one of Alberta’s first major solar-plus-storage projects. The project is being developed as a joint venture between developer Longspur Developments and a local businessman.
Virginia governor Northam signs Clean Economy Act, includes US’ “largest energy storage target”
In April 2020, Virginia’s governor signed the Virginia Clean Economy Act into law. The new law contains a 3.1 GW energy storage target and a goal to achieve 100 percent renewable and clean energy by 2050. In terms of energy storage, this is the largest state-wide target in the US to date. In February 2020, Dominion Energy started development on four storage projects estimated to produce 16 MW of output in Virginia.
In March 2020, the Public Utilities Commission of Nevada adopted an energy storage deployment target of 1,000 MW by 2030. There is an incremental target to achieve 100 MW of energy storage deployment by the end of 2021.
Massachusetts set to launch clean peak standard, opening new chapter in grid’s evolution
Massachusetts’ first-of-a-kind Clean Peak Standard is set to take effect this month. The Standard creates credits for clean energy delivered during time windows identified as peak hours in a given season. Utilities are required to obtain clean peak credits equal to a percentage of total electricity delivered in a year, starting at 1.5 percent in 2020 and growing annually. The Standard is meant to incentivize development of energy storage projects, which allows power producers to control electricity delivery during peak periods and reap the benefits of the Clean Peak Standard.
Two years in, New York’s storage market has grown “faster than we expected”
In just two years, storage projects in the New York Independent System Operator's wholesale storage queue jumped from 1,400 MW to 8,000 MW, while projects jumped from 100 MW to 1,000 MW in the distribution interconnection queue, according to New York State Energy Research and Development Authority (NYSERDA). NYSERDA has awarded bulk incentive money to nine projects as of March 2020. These projects total 360 MW and almost 1,400 MWh with awards totalling US$78m for projects projected to cost US$430m.
Industry events
Energy Storage Summit: Latin America, online - June 23-25, 2020
US Federal Energy Regulatory Commission technical conference, online - July 23, 2020
Focus on energy storage
To read previous issues of the Energy storage updater, click here.
Senior Associate
Email
deanne.barrow@nortonrosefulbright.com
Recent publications
Publication
ECJ confirms public tenders’ restrictions for companies from third countries with no procurement agreement with the EU
EU Member States may allow companies from countries that have not concluded an agreement guaranteeing equal and reciprocal access to public procurement (public procurement agreement) with the EU to participate in public tenders, provided there is no EU act excluding the relevant country.
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