Merchant Batteries: Key Considerations for Investors and Lenders

Synopsis

With renewables investment driving the need for increased system flexibility, battery storage will play an important role in the energy transition. Taking ERCOT as a case study, we assess the investment case for merchant batteries, including:

• What are some of the key risks and financing challenges for merchant batteries?
• How have existing batteries performed in ERCOT to date, including Storm Uri?
• How quickly will Ancillary Service markets in ERCOT saturate and what impact will this have on project returns? How have other regions’ Ancillary Service markets responded to an increase in battery participation?
• How much value is there in wholesale price arbitrage?
• Can co-locating with solar provide additional benefits relative to standalone assets?