System integrator and project developer On.Energy has closed a US$77.6 million construction credit agreement with Pathward, NA and BridgePeak Energy Capital to build its 160MWh Palo de Agua battery energy storage system (BESS) portfolio.
The portfolio is to be built across Texas, and includes the Poplar, Ft. Stockton, Mesquite, North Pecos, Colorado, Colorado 1, Andrews, Fathead 1, Fathead 2, and Badger BESS projects. All of the BESS projects in the portfolio are expected operational sometime in 2025 and have a capacity of 9.9MW/20MWh.
The company also operates the Palo Verde portfolio, which includes the 20MWh Maverick BESS in Alvin, Texas, the 20MWh Crosby BESS in Crosby, Texas, the 20MWh Spencer BESS in Pasadena, Texas and the 20MWh Winmil BESS in Angleton, Texas.
On.Energy made its start in Latin America, in the commercial and industrial (C&I) energy storage segment, and has expanded into the US with a focus on distributed utility-scale portfolios.
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On.Energy operates under two business models, the first being as a system integrator and engineering, procurement and construction (EPC) contractor which sells solutions to generators, third-party developers and large corporates. Its focus in this area is on C&I projects for applications including critical infrastructure and data centres in six Latin American countries as well as Texas in the US.
The second is in leveraging its system integrator and EPC capabilities for its own project portfolios, which On.Energy develops, builds, owns and operates in select US markets, predominantly for front-of-the-meter applications, as in the case of the Palo Verde and Palo de Agua portfolios.
In September 2024, On.Energy acquired nine in-development BESS projects in California’s CAISO market and in April of the same year, it raised US$25 million in debt financing toward its goals of developing 400MWh of assets in ERCOT and a further combined pipeline of Texas and California projects totalling 1.1GWh.
Texas continues to be an active market for BESS projects, driven by the ERCOT wholesale market’s unique structure, which enables merchant opportunities for storage developers. The state accounted for 25% of a total 3,431MW/9,188MWh US grid-scale battery storage deployments recorded in Q3 2024, according to market research firm Wood Mackenzie’s most recent US Energy Storage Monitor Report.
A trend in the ERCOT market, as discussed in a July 2024 conversation with Energy-Storage.news and Modo Energy(Premium access article), is that revenues are becoming concentrated into a fewer number of days. This leads to an increase in volatility, where prices are either incredibly high or incredibly low.
Writing for Energy-Storage.news, Ali Karimian and Alden Phinney of AI-powered energy services provider GridBeyond recently elaborated on GridBeyond’s white paper exploring market trends in ERCOT and CAISO:
“It found that in ERCOT, battery storage revenues have dropped significantly in the past year due to factors such as increased battery installations, more renewable generation, and changes in how ERCOT dispatches the ancillary service ECRS.”
As the markets continue to change, operators will need to consider a wide array of factors, including price signals, regulatory frameworks, weather patterns and operational constraints to name a few.
Alan Cooper, CEO of On.Energy said of the announced financing: “In less than 12 months, we have managed to structure Project Finance credit solutions for more than 240MWh, deploying critical infrastructure to one of the country’s most volatile power markets.”
“This follow-on to the currently operating Palo Verde portfolio triples our installed and in-construction asset base across the United States. Taken together with a doubling of our integration revenues from 2023 to 2024, we couldn’t be more excited about the dynamic capital asset platform we have created. None of this would be possible without these best-in-class partners: Pathward and BridgePeak.”
