Goldman Sachs-backed BESS developer Gridstor makes first ERCOT project acquisition

Gridstor has the backing of Goldman Sachs Asset Management, and the acquisition follows the late 2023 start of commercial operations of the company’s first project, Goleta, which is in Santa Barbara, California.

Construction could begin on the 2-hour duration lithium-ion (Li-ion) BESS project this summer for Evelyn to come online in the spring of 2025. It is being sited to connect to an existing substation operated by utility Texas New Mexico Power, a subsidiary of energy holding company PNM Resources.

Gridstor claimed that the use of the existing electricity transmission infrastructure would enable the BESS to begin its grid-connected operations quickly, taking part in the ERCOT market which accounts for more than 80% of Texas’ load. Delays in connecting to the grid are being increasingly cited among the major barriers to energy storage deployment, not just in Texas or even the US, but in mature markets around the world that include the UK and continental Europe.

ERCOT’s energy-only market has made it attractive to owners, operators and investors of merchant energy storage assets. According to stats from the US government Energy Information Administration (EIA) published in January, around half of all new utility-scale battery storage facilities planned to be added by the end of 2025 are in Texas.  

Engineering and procurement work has already begun for the Evelyn project, with Gridstor claiming to have engaged “leading suppliers and contractors”.

While ERCOT is still second to California’s CAISO grid and market territory in terms of BESS deployment – as of November 2023 EIA said CAISO had surpassed 7GW of grid-connected large-scale storage to less than half that figure in ERCOT – the Texas-based merchant market is currently growing much faster than its California counterpart.

That said, CAISO’s installed battery assets are trending toward 4-hour duration or even more, while typical ERCOT projects are at around the 2-hour mark.

On that note, Gridstor said a couple of days prior to the Texas announcement that it had closed the sale of tax credits in its California project, Goleta, with JP Morgan. Investment tax credits (ITCs) for standalone energy storage, introduced in US president Joe Biden’s Inflation Reduction Act (IRA), can be traded from energy storage project owners to other entities with tax liability.

The value of the tax credit transaction was not disclosed, however Gridstor did say the project, which is at 60MW/160MWh and oversized in order to meet the terms of a 40MW long-term resource adequacy (RA) contract with utility Southern California Edison (SCE) as well as capture potential merchant market upside, was also financed through a debt deal with NORD/LB and Mitsubishi HC Capital America.

Energy-Storage.news first covered Gridstor in late 2022 when the company bought a 500MW/2,000MWh pipeline of BESS projects in Los Angeles from developer Upstream Energy, expected to come online by the end of 2026. Backer Goldman Sachs’ other interests in energy storage include a US$250 million investment commitment to Canadian advanced compressed air energy storage (A-CAES) company Hydrostor.

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