System integrator and project developer On.Energy has acquired nine in-development battery energy storage projects, which will play into California’s CAISO market.
The company announced via LinkedIn yesterday (16 September) that it has completed the acquisition of 480MWh of what it described as ‘utility-scale distributed generation projects.’
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A number of the projects already have offtake contracts secured, and commercial operations could begin in Q4 2026 at the earliest. The company said the sites are strategically positioned across southern and coastal regions of California.
Energy-Storage.news spoke with On.Energy CEO Alan Cooper a few days ago at the RE+ clean energy conference and exhibition in Anaheim, California, where the CEO discussed the company’s strategy of seeking out utility-scale projects which are built at the distribution level.
The developer—which also carries out system integration on all of its projects—is nearing the mechanical completion of its first projects in the US, a portfolio of four equally sized 9.9MW, 2-hour duration (20MWh) systems in the Texas ERCOT merchant market.
To this, it has added around 11 projects in total in CAISO, bought from two different platforms. They range from 20MW to 32MW output with a 4-hour duration battery capacity.
“Distribution-level storage is interesting because it provides a lot lower development risk [than bigger projects],” Cooper said.
“You can have a permit mess up a whole project, and if you’ve invested four years and millions of dollars in the interconnection, that churn of having a project fall through the cracks is really expensive, and in some cases, it can sink a platform,” he said.
“In distribution-level, we’re spreading that risk across geographic areas, so revenue is spread across geographic areas, which is always a good thing.”
ERCOT project revenues come from merchant market opportunities and CAISO revenues from long-term offtake contracts for resource adequacy (RA).
To fuel its US expansion, the company raised corporate and asset-level commitments in 2022 from UK-based fund SDLC Energy Efficiency Income Trust (SEEIT), with subsequent financings through a US$25 million Series B in mid-2023, and US$40 million in construction and debt facilities with Live Oak Bank secured towards the end of last year. In May 2024, it secured $25 million in senior secured, development debt from Lombard Odier’s private credit fund.
The latter is what enabled its 80MWh Palo Verde portfolio in Texas, and On.Energy greenfield developed one of the four assets: “just to build out that core competency in bringing projects through a whole development phase,” Cooper said.
Noting that On. has system integrated “every project we’ve ever built,” Cooper revealed that its initial portolio of Texas projects utilises CATL’s liquid-cooled EnerOne BESS solution, with power conversion system (PCS) technology from EPC Power. Its next will be “mostly” supplied by Sungrow, while the company is in discussion with manufacturers to enable a higher portion of US-made domestic content, although Cooper said further details cannot be revealed at this time.
Across its 60 or so projects delivered to date, On.Energy has contracted with six different battery module makers and eight inverter suppliers, landing on an increasingly standardised “couple of different solution sets,” the CEO said.
On.Energy, which began as, and still continues to be, a developer-integrator-owner of commercial and industrial (C&I) projects in Latin America (Premium access), has split its US portfolio roughly 50:50 between merchant and contracted assets.
‘Distributed’ play means more comfort around merchant exposure
“Between that profile you get the returns that we’re seeking with some protection, and we also have this integration business, which is providing cash flow into the whole thing and also supporting that strategy even further,” Alan Cooper said.
Energy-Storage.news has heard previously from On.Energy and fellow developers of similarly distributed large-scale projects in North America like Agilitas Energy and Available Power.
We heard back in 2023 from Available Power business development VP Alex Krass that the sub-10MW segment in ERCOT has “fewer eyes on it,” and the other advantage with that sizing is that projects of less than 10MW get a fast-track through permitting and siting processes.
On top of that comes the development risk associated with the bigger projects, Cooper said.
“With larger scale utility-scale assets, let’s call it the 300MW, 400MW [range], you need to get commercial banks comfortable with that merchant revenue stream. That’s been a bit of a catch-22,” Cooper said.
Arguably, there’s been an ‘underbuild’ of storage [in the US]. There’s a lot of buzz about it and a lot of press, but there’s been an underbuild relative to what the expectation was, because commercial banks are still a little bit queasy around merchant storage.
“When you’re looking at the smaller distributed generation (DG) stuff, you can right-size the risk, and frankly, you can spread it among a few different lenders on a portfolio basis. When you’re talking about a 40MW commitment to battery storage, it might be the right size for somebody to start dipping their toe into merchant versus, a massive bank investing US$500 million into a single asset at one hub, and if volatility doesn’t appear that year, then it struggles.”
