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Ameresco’s 2.1GWh California battery contract drives 36% uplift in project revenues

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The award of contracts by utility Southern California Edison (SCE) for 537.5MW/2.150MWh of battery energy storage systems (BESS) has enabled a significant rise in revenues for Ameresco’s project business.

The US clean energy solutions company, which is involved in everything from energy efficiency upgrades to microgrids, renewable energy generation with and without energy storage, standalone battery storage and renewable natural gas, reported its latest quarterly financial results this week. 

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Covering the fourth quarter of 2021 and full-year results, Ameresco recorded full-year revenues of US$1.2 billion, an 18% increase on 2020 figures, US$152.7 million of adjusted EBITDA, a 30% increase.

Quarterly revenue and EBITDA figures of US$415.9 million and US$48.5 million were reported, up 32% and 36% respectively from Q4 2020. 

President and CEO George Sakellaris described it as a year of outstanding performance for the company, which demonstrated the strength of its diversified business model. He noted however that revenue growth was led by the company’s Projects business, largely due to the SCE project, which is the biggest contract in Ameresco’s history. 

The contract award was announced in October last year. The three separate four-hour duration BESS projects, each connected to a distribution network substation pocket, will help address electricity network reliability issues for the California investor-owned utility (IOU).

Q4 2021 project revenues were US$333 million, versus US$244.8 million for Q4 2020, a 36% increase. 

With revenues starting to be recognised for the SCE contract, which will see BESS installed at three sites in SCE’s service area, Sakellaris said that “despite the well-publicised global supply chain challenges, we are pleased to report that the design/build project is proceeding as expected”.

“Importantly this contract is representative of the types of the projects that are emerging as the power industry addresses grid stability and reliability. Our track record of execution on projects of increasing size and complexity puts Ameresco in a distinct competitive advantage to capture similar opportunities in the periods ahead,” the CEO said, calling it an excellent example of the “ever expanding addressable market”.

‘Several other large opportunities’ in battery storage being pursued

On those supply chain shortages, the company’s technology agnostic approach has enabled it to “go out shopping,” and Ameresco’s flexible strategy gave it a “tremendous competitive advantage” on the SCE project, Sakellaris said in reply to an analyst’s question.

The engineering, procurement and construction (EPC) deal with SCE almost doubled the company’s project backlog sequentially to US$1.5 billion, while the company is pursuing “several other large opportunities” that it expects to win. 

News of the deal has raised both Ameresco’s profile and the profile of battery storage for electricity suppliers in the US, and requests from both utilities and smaller cooperatives have picked up “considerably,” Sakellaris said. 

While the company expected that most of the contracts it will win in the near term will not be as large as 2.15GWh, it would “love to tackle projects of similar size,” and the CEO said that now that Ameresco knows “much much more about this project,” its teams feel more comfortable about its execution. 

“Battery storage is a key market for us and this project puts us in a different level of competitors,” he said. 

Some of those BESS project contracts will be EPC contracts, others will be systems that Ameresco will ultimately own. Often the nature of that ownership structure is an ongoing conversation during negotiations ahead of contracts being signed, Ameresco CFO and senior VP Doran Hole said.

In other words, a mix of power purchase agreement (PPA) -style contracts for assets the company will own, as well as EPC contracts to build for the customer.  

The CFO said that for assets it has in development, for which it has a strong confidence contracts will be signed imminently, Ameresco has about 266MW of solar and battery storage, with about 60MW of battery storage in there and 45MW of standalone battery storage. Storage project durations vary, with most of either two-hour or four-hour durations, Hole said. 

Some light was shed on Ameresco’s capital expenditure and EBITDA performance expectations in response to another analyst question.

According to Doran Hole, solar PV capex and battery storage are similar, at a “couple of dollars per watt,” although battery pricing has more ups and downs to consider at present. EBITDA is likewise similar, about US$250,000 per megawatt per year, with a 75% EBITDA margin range. 

Energy storage system integrator and technology provider FlexGen was selected by Ameresco to supply the full BESS solutions for the SCE project. FlexGen CEO Kelsey Pegler spoke to Energy-Storage.news for an exclusive interview shortly after that announcement was made.

“There’s a lot of eyes on this project. California and beyond will be looking at this,” Pegler said, discussing the technologies FlexGen will be using and sharing further views on the present state and evolution of the battery storage business.

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