by Julian Spector
August 06, 2020

This has really been the Summer of Storage.

While I was documenting the leaderboard of currently operating storage owners over the past several weeks, a host of companies unleashed a seemingly endless barrage of new projects that will fundamentally alter the scale of U.S. grid storage development. It’s time to dig into what those developments mean for the industry.

There are several possible threads to pull on, but one jumped out to me: A cadre of European energy companies are staking claims on the U.S. grid storage sector with some of the most ambitious projects out there.

Italian utility Enel, Swiss asset manager Capital Dynamics and French power company EDF all inked landmark storage deals in recent weeks, promising to bring hundreds, if not thousands, of megawatts online in the coming years. These deals presage a lively competition between the Old World energy masters and their younger American counterparts.

That makes the front-of-meter market more fun to watch and promises good things for ratepayers. Having well-capitalized global companies with extensive project development experience join the fray means lower costs for battery peakers, which means fewer uneconomic fossil plants, less air pollution and more solar power put to use.

The European utilities are using their freedom to test out new technologies in American utilities’ backyards. If they like what they see, they can bring it back home. U.S. utilities by and large do not participate in these sorts of overseas ventures, although independent power producers such as AES have found value in a global research and development sandbox.

From humble beginnings…

The recent news picks up a storyline from the ancient days of 2016 and 2017 when large batteries were just appearing, and carbon-free grid commitments were still politically unthinkable outside Hawaii.

That was when the Europeans rushed to buy up American battery startups. At the time, they largely opted for commercial and industrial expertise:

  • Engie picked up Green Charge, which used batteries for demand charge management at schools and businesses.
  • Enel bought Demand Energy, which broke open the New York City market with a microgrid at an affordable housing complex. The startup had only installed 3 megawatts of storage at the time, but Enel found value in its distributed energy controls software.
  • Wärtsilä acquired Greensmith, which differed from the other acquisitions in that it integrated batteries small and large.
  • EDF attempted to buy commercial storage pioneer AMS for its software, but it instead opted to build a behind-the-meter business in-house.

Given how sparse demand was for front-of-the-meter batteries then, the commercial and industrial space may have looked like a promising growth opportunity. At the very least, the check sizes would be smaller. But that market did not grow in accordance with the rosier predictions at the time, and the market effects of these acquisitions were muted.

Enel made some commercial deals happen; Engie largely pivoted its storage to larger systems in New England. EDF won a behind-the-meter deal with Pacific Gas & Electric, but it fell through when the utility went bankrupt. Greensmith got a flow of projects going, with a focus on overseas markets where parent company Wärtsilä had a presence.

The wave of European investment promised a surge of storage activity. Instead, it delivered several years of quiet integration and rebuilding, with occasional modest announcements. The summer of 2020 broke that quiet spell.

Enel raises the stakes

The biggest U.S. storage owners today are regulated utilities that got an early start and renewables-focused power producers like NextEra and Invenergy that added batteries to their repertoire.

Italian utility and global renewables developer Enel is fighting to enter that cohort. Last month, it revealed plans to build 1 gigawatt of batteries across the U.S. in the space of just two years, which would amount to an unprecedented sprint for storage capacity.

The build-out begins in Texas, which has thwarted storage developers in the past but is now rapidly turning into one of the hottest large-scale battery markets. Notably, this build-out is happening within Enel Green Power, the large renewable developer arm, and not through the commercial storage division housed under Enel X.

Enel X is still working toward a target of 300 megawatts of storage by 2022, but it focuses on customer-driven installations. Enel Green Power sees storage as a valuable resource for its clean power plant fleet, which focuses on geographies with competitive power markets.

But Enel told me the storage software expertise at Enel X, resulting from the Demand Energy acquisition three years ago, will play a crucial role in the utility-scale development. That indicates the value of a good battery energy management system to control operations and balance different tasks.

Going up against U.S. storage developers, even the big ones, Enel will benefit from its even more massive global supply chain, said Ryan Prescott, Enel Green Power’s head of growth strategy and energy storage development.

Sudden surge from Capital Dynamics

Swiss asset management firm Capital Dynamics has already bought up many of the largest solar plants in the U.S. Now it’s pushing hard into storage.

Earlier this year, it acquired 8Minute Solar Energy’s Eland project, which set a record for cheap solar but also comes with batteries to the tune of 300 megawatts/1,200 megawatt-hours. And last week Capital Dynamics revealed it is building the world’s largest behind-the-meter clean energy project, which it will own. The solar-storage system will deliver onsite power for Switch’s Citadel data center near Reno, Nevada.

Switch reports the project will save money compared to buying from utility NV Energy. And it will produce 100 percent clean energy from day one, while the state works to hit 50 percent clean by 2030.

Capital Dynamics staffed up on storage and started digging into this resource three years ago, said Benoit Allehaut, managing director for clean energy infrastructure.

It operates just a small test system currently at the Springbok 3 solar plant. But Capital Dynamics has a construction-ready development to add 60 megawatts/240 megawatt-hours to its California Flats solar project, plus two additional massive batteries in Nevada as part of the Switch portfolio, and more big things to come in California.

“I’m trying to catch up on NextEra,” Allehaut said, referring to the current largest owner of operating grid batteries in the U.S. “It’s a little bit like the greyhound and the plastic bunny around the track.”

The renewables giant from Juno Beach, Florida might propose an alternative metaphor, if it ever spoke to the press.

EDF jumps from small batteries to large

EDF Renewables, the subsidiary of French nuclear power giant Électricité de France, unveiled its biggest battery effort thus far last week: 180 megawatts/720 megawatt-hours alongside a 200-megawatt solar plant for NV Energy. The contract term is 22 years.

Early projects in this genre featured large amounts of solar with relatively small battery capacity tacked on. For instance, EDF won a contract from NV Energy last year that paired 200 megawatts of solar with 75 megawatts of battery capacity. But at EDF’s new Chuckwalla project, the battery capacity almost matches the solar capacity. That suggests the business case has more to do with flexible, clean capacity than with eking out a little extra solar plant performance.

EDF Renewables also won a solar-storage deal for Hawaiian Electric, announced in June. That one involves a 60-megawatt/240-megawatt-hour battery on the Big Island to help shift the grid toward its target of 100 percent renewable power. Fellow French energy company Engie won a contract for the same size system in that solicitation.

These mark an evolution in strategy from EDF’s earlier attempts at distributed storage. The initial plan was to help commercial customers lower demand charges using batteries, in the vein of Stem or AMS.

But “the market was going in another direction,” Raphael Declercq, the Distributed Solutions leader at EDF Renewables North America, told GTM previously. Now it’s increasingly about shifting solar power with batteries, which the Nevada project does at an unprecedented scale for the company.