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BESS price falls pushing marginal projects into IRR investors need, US developer says


BESS price falls have pushed many marginal projects in merchant markets into a rate of return needed for investment, US developer Available Power told amidst the sale process for its own 100MW/200MWh ERCOT project.

The falling prices of BESS over the course of the last 6-12 months has been well-documented by recently, and Available Power’s president Ben Gregory said this has significantly boosted the market for projects in merchant markets (like Texas, where ERCOT is the grid operator).

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“A lot of M&A slowed down and then picked up once lithium and BESS prices came down, because a lot of projects that were on the margins for IRR (internal rate of return) became more attractive,” Gregory said, speaking in an interview at Solar Media’s Energy Storage Summit USA 2024 in Austin, Texas’ state capital, last week.

“A project that was at 12% IRR last year, is now at 14-15% IRR because of the BESS price falls, and has now been pushed to the rate investors need for merchant assets. So you will see a lot more activity. The price decreases have had a tremendous impact on what we’re doing.”

The president of system integrator Powin alluded to this type of IRR-dependent project in comments to included in a previous article.

Company’s 200MWh project hits NTP and enters sales process

M&A activity has subsequently picked up, especially in the 9.9MW/20MWh asset class – a size of project in ERCOT which benefits from a much quicker interconnection process due to being below a 10MW threshold – Gregory said, saying the firm recently sold three assets this size. Part of this is also down to an increased level of education from investors about energy storage, he added.

Alongside its portfolio of 9.9MW/20MWh projects, Available Power has developed a much larger 100MW/200MWh project near Austin, at a new airline and technology centre development called Greenport.

Gregory said the Greenport BESS project has reached notice to proceed (NTP) and is currently being sold by the company, though its commercial operation date (COD) had to be pushed back substantially from the mid-2024 initial target.

“Greenport is at NTP, and we’re currently selling the project. We are running an auction process, in coordination with (project M&A marketplace) LevelTen Energy, and have substantial interest in part because of the tolling agreement options that have recently emerged in the market,” Gregory said.

“What made it tough to sell last year was the uncertainty and long-lead times on the equipment supply, especially on circuit breakers, so we secured our own supply of equipment to achieve a commercial operation date (COD) of February 2026. That was a painful exercise, but was necessary in order to meet investors’ requirements.”

‘Manufacturing’ approach to development in face of falling prices then asked Gregory how the firm was dealing with reportedly falling prices for NTP projects in the US market. Speaking with in November, and specifically mentioning 5-20MW projects and the Texas market, developer-operator Agilitas Energy’s CEO Barrett Bilotta said prices being asked for some portfolios of NTP projects had plummeted by 70% year-on-year.

In response to the question of project pricing, Gregory said that Available Power is taking a “manufacturing-like, standardised approach to development”.

Gregory: “We know what buyers want versus trying to accommodate or anticipate everyone’s hypothetical requirements. By dialling in on a specific set of requirements, we might leave some money on the table but we can do much more volume.”

Speaking at last year’s Summit event in Austin, Available Power’s VP business development Alex Krass explained how Available Power has an engineering, procurement and construction (EPC) partnership with substation specialist Linxon to build projects once they transact.

Discussing the BESS pricing fall, Gregory added that supply from China was “attractive” but that products from other countries are nearing parity. Consultancy Clean Energy Associates (CEA) forecasted in October 2023 that the Inflation Reduction Act’s incentives would make US-manufactured BESS cost-competitive with China’s by 2025.

12 November 2024
San Diego, USA
As we see more storage projects become operational, the big question is “how to maximize your assets?” This event will prepare the industry for the road ahead, looking at the core fundamentals of asset management, understanding operational challenges, along with the latest optimization and software development. You can expect to meet and network with all the key industry players from major US asset owners, operators, RTOs and ISOs, optimizers, software and analytics providers, technical consultancies, O&M technology providers and more.

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