Last year we covered the bankruptcy of venture-capital-backed EV maker Coda, and the plans of its new owner to resurrect it as a grid battery systems provider. Now we’re seeing the fruits of that plan emerge, in the form of yet another no-money-down energy storage play -- this one financed internally by Fortress Investment Group (FIG), the multi-billion-dollar investment firm that picked up Coda’s assets for $25 million in June.
Over the past month, Coda Energy has quietly installed about twenty of its “CODA Core” Tower systems at commercial and industrial sites across California, and it has also secured financial backing from its parent company for a total of 100 systems over the next few months, John Bryan, vice president of product and marketing, said in a Monday interview.
At $64,000 for each 30-kilowatt, 40-kilowatt-hour, lithium-ion-battery-based, inverter-integrated unit, that adds up to a $6.4 million commitment from Fortress -- and under the terms of its financing model, the customers pay nothing, he said.
Instead, “we’ll pay for it, no payments at all for the first year, and the nine following years, we’ll split the difference in savings with the end user,” he said. In other words, Coda's customers will pay only 50 percent of whatever savings the systems provide to annual utility bills, rather than a set payment -- an offer that puts the onus on Coda to achieve high enough savings to pay back its system installation and maintenance costs over the term of its ten-year-warrantied lifespan and beyond.
If the first 100 projects appear on their way to proving that this revenue stream represents a workable model, Fortress is considering expanding the program to include 400 installed systems, representing $25 million in financing for a combined 12 megawatts/16 megawatt-hours of storage capacity, he said.
That could put Coda Energy on par with Stem, the startup that in October launched a $5 million financing program with Clean Fleet Investors to drive 15 megawatts of building-integrated battery systems, and Green Charge Networks, which last week announced its own $10 million financing deal with TIP Capital meant to bootstrap 5 megawatts of installations by year’s end.
It also puts Coda in a position to challenge SolarCity and Tesla in their bid to create the country’s largest fleet of behind-the-meter storage systems. The companies have been piloting battery-backed solar systems in homes for the past two years, and in December they launched an energy storage financing program targeted at PV-equipped commercial buildings, with a target of 30 megawatts to 50 megawatts of installations this year.
Reducing demand charges (the portion of a commercial building’s utility bill that accrues whenever electricity usage exceeds a set amount) is the primary economic driver for these battery systems. In markets such as California and New York, ever-rising demand charges can add up to more than half of a commercial customer’s utility bill. By metering building energy use, anticipating when it’s about to peak, and injecting stored battery power to prevent it, demand charges can be nipped in the bud.
That requires more than a battery, of course. For its no-money-down energy tower systems, Coda Energy has partnered with inverter maker Princeton Power to convert battery DC power to building-ready AC, and has designed the software that manages the charging and discharging of the system in response to building load metering, Bryan said.
Coda’s new combined system received Underwriters Laboratories (UL) 1973 safety standard certification last month, as compared to the UL 1741 standard for inverters used in buildings, he noted. “The big difference is, you go from a two-month approval process from a city inspector, to a couple of hours [long] approval process,” he said, which helps smooth out customer concerns over the technology’s effect on their building operations.
Parent company Fortress Investment Group isn’t just a financer of Coda’s energy storage systems -- it's also a potential customer. While Coda is targeting plenty of buildings that aren’t part of Fortress’s multi-billion-dollar real estate holdings, “they have their portfolio of buildings they’re responsible for, and places with very high demand charges are places where I can ask them, ‘Hey, what do you have in New York, in San Francisco, in Pasadena?’ They own something everywhere,” he said.
So far, demand charge reduction is the core offering from Coda's systems. But it's possible that customers could decide to start using battery power to lower consumption during periods of high time-of-use prices, or bid the storage capacity into energy markets -- though Coda’s customers haven’t done that so far, he said.
Coda has also installed its batteries in a solar-PV-powered electric vehicle charging station in Benicia, Calif. where it’s partnering with power converter maker Ideal Power and energy storage software provider GELI, he said. Other Coda customers are exploring ways to use Coda’s batteries to manage their solar PV’s economic value, he noted.
At its Monrovia, Calif. headquarters, Coda is planning a May completion of a 1.5-megawatt battery system linked with EV chargers and rooftop PV, which could test out grid services with the California Independent System Operator, he added. (That project received a grant from California’s South Coast Air Quality Management District in 2012, but saw construction stop after the company’s bankruptcy.)
The big question for all of these no-money-down building battery offerings is whether they’ll end up making or losing money for the companies offering them. GTM Research predicts the U.S. market for distributed energy storage will expand at a 34 percent cumulative annual growth rate to reach 720 megawatts by 2020, with demand charge reduction as the top driver, and with more effective economic management of on-site solar PV quickly growing in importance.
Grid services like frequency regulation can also be revenue generators in certain markets, the report notes -- but perhaps as important a driver are the incentives being offered in certain key states. There’s no doubt that Coda Energy’s no-money-down offer is boosted by Self-Generation Incentive Program (SGIP) incentives in California, where the company has deployed all of its systems to date.
Stem, Green Charge Networks, SolarCity/Tesla and other distributed storage projects in California also rely on SGIP funding to cover a significant portion of upfront costs. It’s notable that New York, the other state with demand charges as hefty as California’s, is also creating an SGIP-like program to boost customer-sited storage.
It’s too early to say how Coda and its competitors could put their distributed batteries to broader grid uses. Right now, regulations and market structures simply don’t exist to allow aggregated battery “fleets” to participate in the way that megawatt-scale energy storage does. But there’s certainly an opportunity for regulators, grid operators, utilities and the customers who’ve installed these batteries to come to some kind of agreement, Bryan noted.
“Once you have a device that pays for itself, but can adapt and communicate, in this connection between the energy space and the telecom space, you’re effectively creating a smart grid from the ground up,” he said, “one customer at a time.”