Dive Brief:
- Battery storage developer Plus Power has completed $1.8 billion in new financing that will cover five projects in Texas and Arizona, amounting to 1,040 MW/2,760 MWh of storage, the company announced Oct. 17.
- The financing commitments include $707 million for the 250 MW Sierra Estrella energy storage project in Arizona, west of Phoenix — the largest such announcement for a standalone energy storage project to date.
- Both Texas and Arizona have been experiencing extreme temperatures and reliability challenges. In Texas, “it’s a combination of load growth with an aging, retiring set of generation that is really driving demand for fast, flexible dispatch that storage provides,” Polly Shaw, chief external relations officer with Plus Power, said.
Dive Insight:
Plus Power has a portfolio of lithium-ion battery systems in more than 25 U.S. states and Canada, with 10 GW of capacity currently in transmission interconnection queues. The new financing commitments will support the construction and operation of five new projects, and include 11 industry lenders and investors, according to the company.
The company’s project financing in Arizona was $903 million and included the Sierra Estrella project as well as a second facility, totaling 340 MW/1,360 MWh. Both facilities are under construction and have 20-year energy storage agreements with Salt River Project. They are anticipated to come online by the second quarter of 2024, “in time for another summer of anticipated record peak demand,” the company said in a statement.
In Texas, the announced transactions will go to the construction of three new battery plants amounting to 700 MW and also expected to come online next summer, as higher temperatures push up electricity demand and lead to thin operating reserves on the grid.
“We feel like this is a watershed moment for standalone storage, in that we’re bringing projects to market at scale that are going to have a significant impact on the grid,” Joshua Goldstein, Plus Power’s chief financial officer, said.
“I think that this is representative of a point in time where in the future, a very large number of well-developed projects should be able to come into the market – and it’s our goal and plan to bring several more projects like this online in the next several years,” he added.
In early 2021, the Texas grid experienced widespread blackouts amid an extreme winter storm, causing four million people to lose heat and water access. In less than three years, however, energy storage on the state’s grid has increased tenfold, and the Electric Reliability Council of Texas has more than 3 GW of battery storage online.
“The demand from load growth is extraordinary in Texas,” Shaw said. The state is seeing a need for fast-dispatch flexible resources to jump in, especially between the hours of around 7 pm and 8 pm, when the sun is setting and wind hasn’t yet ramped up, she added.
And in Arizona, “you’re seeing a shortage of capacity during the summer months, like anywhere in the Southwest or West” Shaw added.
While Plus Power’s two Arizona projects have energy storage services agreements with Salt River Project, those in the ERCOT market don’t have similar agreements.
“There are some similar types of issues and problems in ERCOT and SRP that we are addressing with these batteries, but the market constructs are different,” Goldstein said. The company has executed a hedge with Goldman Sachs' commodities group for a portion of one of its Texas projects.
“We’re solving problems in slightly different fashions depending on the market,” Goldstein said.
“Storage is sorely needed in Texas to help reduce stress on the grid during peak summer and winter demand, so the additional investment is very welcome here. More storage should lead to less curtailment of wind and utility-scale solar generation,” Matt Boms, executive director of the Texas Advanced Energy Business Alliance, said in an email. In 2022, ERCOT curtailed 5% of its total available wind generation and 9% of utility-scale solar generation, according to the U.S. Energy Information Administration.
However, battery storage developers in the region face one key challenge – interconnection.
“There’s over 114,000 MW of battery storage seeking interconnection to ERCOT, so one key challenge is doing a better job of connecting not just power generation but also energy storage solutions to the grid,” Boms said.
