Deep roots define the winners in the energy storage industry

By Tim Larrison, CFO | August 4, 2016

Before the last great drought, California irrigated itself into a tropical paradise, carpeting its suburbs, parks, and golf courses with lush, expansive lawns. It was the Florida of the West, until the reservoirs ran dry and severe rationing took hold. Deprived of their fluid subsidies, the shallow-rooted greenery withered, leaving a stark new landscape.

It is that same sort of awakening that now faces the energy storage industry, bolstered for the past 15 years by government investment and incentives such as the California Public Utilities Commission’s Self Generation Incentive Program (SGIP). According to Navigant Research, global C&I ESS power capacity deployments are expected to grow from 499.4 MW in 2016 to 9.1 GW in 2025. Consequently, the industry has attracted numerous developers, buoyed by optimistic venture capitalists, who may have envisioned storage-assisted renewable power sites sprouting and spreading like social media startups.

Show me the balance sheet

Under new SGIP rules, it is expected that the programs’ cash-based funding of energy storage will run out during 2017. As when the 1603 cash grant in the solar industry ran out in 2012, it will be significantly harder for storage companies to obtain financing for commercial energy storage projects.

Of course, these companies can turn to the recently extended federal income tax credit to offset the cost of energy storage installations paired with renewables such as solar. But the type of investors willing to shoulder such liabilities are no exuberant VCs. These more traditional financial investors, which fund projects in transportation, communication, and water treatment see energy storage projects as they truly are—infrastructure investments that require deep, long-term financial commitments.

Not surprisingly, these investors demand stability. Balance sheets showing financial strength will put an energy storage applicant in good standing; shallowly-funded software start-ups may find it more difficult to attract the required investment to roll-out project pipelines. That’s why we foresee more energy storage companies following in the footsteps of Green Charge and its predecessors in the solar industry, hitching their wagons to companies with deep financial resources and expertise. Those that can’t, or choose not to, will likely fall by the wayside. Our relationship with ENGIE gives us the backing we need to assure customers and project investors that we can continue to drive growth in the energy storage industry.

Simplicity is key for commercial customers

How does this financial muscle benefit customers? At Green Charge, being part of the ENGIE family allows us to own, operate and maintain on-premises equipment, so we can continue to deliver a simple, low risk solution. This gives both customers and investors comfort that we will be there over the 10 or 20 year contract life. With one team designing, financing, installing and managing their energy storage solutions, Green Charge customers have only one energy storage relationship to manage. As such relationships take root over the years, we will all be in a better position to weather the ups and downs of the renewable energy market.