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Geothermal player Ormat says energy storage business ‘on track’ to exceed 500MW by 2025


Ormat Technologies has signed a power purchase agreement (PPA) for a California solar-plus-storage plant, shortly after announcing the start of commercial operations at two standalone battery projects.

The renewable energy company said yesterday (5 July), that it has signed the PPA deal with San Diego Community Power, one of California’s Community Choice Aggregator (CCA) non-profit energy suppliers, for its Arrowleaf Solar and Storage Facility.

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Ormat Technologies is known for developing, building, owning and operating geothermal power plants, as well as waste-to-energy facilities. It opened an energy storage division in 2020 following its 2017 acquisition of energy storage company Viridity for US$35 million, targeting what it saw as growth opportunities in the sector and has also added solar PV plants to its portfolio.  

Through a 20-year contract, Ormat will supply the CCA with energy generated from the plant at what it described as “predictable rates” for the load-serving entity’s customers. Arrowleaf will be a 42MW solar PV plant paired with a 35MW/140MWh battery energy storage system (BESS), and is scheduled to begin commercial operations in the first half of 2025.

Ormat did not disclose the BESS technology provider to the project, but said equipment had been purchased at “an attractive purchase price”.

Also helpful to the project’s economics is that Arrowleaf, in California’s Imperial County, is located close to an Ormat geothermal power plant, North Brawley, which was put into service in 2010 with 13MW generation capacity. Arrowleaf will share the geothermal plant’s grid interconnection infrastructure.

“As a result, Ormat can leverage prior investments to seamlessly integrate the solar and storage components into the grid, optimising the overall energy generation and distribution system,” Ormat Technologies CEO Doron Blachar said.

The project is in the service area of utility Imperial Irrigation District, with SDCP, like other CCAs, utilising its host utility’s grid infrastructure while guaranteeing its customers can get a choice of the energy mix they buy their power from.

A few days earlier, on 26 June, Ormat announced that it had completed and brought into commercial operation two standalone BESS projects, one in Texas to compete in the ERCOT market and another in New Jersey, which is participating in the PJM Interconnection market.

The two 1-hour duration BESS facilities total 43MW/43MWh. Upton, in Texas, is 23MW output and 23MW capacity, Andover BESS is 20MW/20MWh. While Upton will participate in ERCOT’s energy and ancillary services markets, Andover will provide ancillary services only to PJM.

The pair are part of a four-project portfolio for the company, with the other two being Bowling Green, a 12MW/12MWh system in Ohio, and the 7MW/7MWh Howell BESS project, also in New Jersey. Those two already went into action earlier this year.

CEO Blachar noted that being able to leverage the investment tax credit (ITC) for standalone energy storage, which was brought in at the beginning of this year in the US Inflation Reduction Act (IRA), would “maximise the economic advantages of these storage assets”.

“This eligibility allows us to claim approximately 30% of the asset value in tax credits, reducing our capital needs and enhancing earnings,” Blachar said.

Ormat targets 500% growth in energy storage business by 2025

Energy storage still remains a relatively small contributor to Ormat’s total revenues: in its Q1 2023 results the company’s adjusted EBITDA from electricity sales, its biggest segment, was US$120.8 million, while for energy storage it was just US$0.8 million.

However, it has stated its aim to become one of the US storage sector’s leaders, with a growth target of between 468% and 502% in megawatts by 2025 in energy storage, while its ambitions for geothermal, a much more difficult sector in which to develop new facilities quickly, is between 21% and 24%.

In late June, Blachar said Ormat was “on track” to achieve its energy storage growth targets, having overcome supply chain challenges and project complexities to meet its desired growth trajectory in the first half of this year.

“We remain on track with our energy storage growth targets, with plans to bring online two additional assets in 2023 and make further progress towards achieving between 500 to 530MW and over 1GWh in total capacity by the end of 2025,” Blachar said following the announcement of the New Jersey and Texas projects coming online.

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