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by Julian Spector
July 16, 2020

The front-of-the-meter battery market has always been a lumpy thing — huge quarters followed by tumbleweeds. But lately, it’s moving head-spinningly fast.

The Storage Plus series on the biggest U.S. grid battery owners captured the leaderboard at a fixed point in time. That ranking has already shifted since the beginning of June. Private equity firm and greenfield developer LS Power recently activated 62.5 megawatts of battery power at its Gateway Facility. Combined with its 40-megawatt Vista project, that catapults LS into the top five asset owners. But those rankings will shuffle again, as LS Power plans to scale Gateway to 250 megawatts in the coming months.

And Gateway’s own grasp on the title of most powerful U.S. battery will prove short-lived as even bigger projects head toward completion this year.

“This is a belt that I think is going to be passed from project to project pretty rapidly over the next few years,” said Daniel Finn-Foley, head of energy storage research at Wood Mackenzie.

The battery asset owner rankings, as of May, had not changed all that much since GTM Squared analyzed them back in 2017. At the time, NextEra led, followed by AES, San Diego Gas & Electric, Southern California Edison and Duke Energy. In the subsequent three years, SCE dropped out of the top five (it contracted for lots of storage capacity, rather than building and owning) and Invenergy burst onto the scene.

After three years of relative stasis in the battery-ownership rankings, the Gateway news shows how quickly things are changing. In this edition of Storage Plus, we’re going to examine what the future holds for these rankings as they enter a period of totally unprecedented activity.

By filtering for front-of-meter batteries that have been announced, begun construction or are already operating, the leaderboard changes dramatically.

Two trends dominate the lineup of the future. The rise of batteries paired with massive solar plants elevates several newcomers to the front of the pack. But well-capitalized firms building enormous standalone batteries make a strong showing as well. Here’s the new lineup.

NextEra Energy

The one constant between the current operating fleet and the future fleet is that NextEra dominates both.

NextEra Energy Resources has more than 1 gigawatt in announced projects forthcoming, including first-of-their-kind systems combining wind, solar and batteries. NextEra’s regulated subsidiary Florida Power & Light is working on the 409-megawatt Manatee Energy Storage Center. The combined pipelines of Energy Resources and FPL put NextEra Energy beyond the reach of any other U.S. battery asset owner.

It’s notable that NextEra checks both boxes for the battery development megatrends. It’s building some of the biggest standalone batteries as well as some of the biggest batteries co-located with renewables. (For more details on the company's history and strategy, see last week’s column.)

LS Power

This developer and energy-focused private equity firm has focused on grid infrastructure since long before batteries became a hot commodity. LS Power deals with transmission lines, pumped hydro facilities, wind and solar plants, and thermal generation. But it became one of the biggest asset owners of operational batteries with the arrival of the first stage of the Gateway project near San Diego this summer.

LS Power doesn’t spend much time touting its achievements; it operated the most powerful battery in the U.S. for two years without really bragging about it. Instead, the company channels its energy into developing massive projects where the market fundamentals make batteries a compelling business proposition.

So far, that has meant California, and the Gateway project may soon swell to 250 megawatt/1,000 megawatt-hours. LS Power is also developing the 125-megawatt LeConte project in Calexico and the 200-megawatt Diablo Energy Storage in the East Bay, which is contracted to PG&E.

But LS Power also owns the 2,200-megawatt Ravenswood Generating Station, a pivotal electricity provider for New York City. The company received regulatory approval to swap out 16 old peaker turbines for 316 megawatts of batteries; now it just needs to line up the right contracts to make that worthwhile.

The fundamentals look strong: New York City is a massive, congested load pocket where siting new power infrastructure is next to impossible. Ravenswood already has the space and the high-voltage hookup, so all that’s left is swapping in some new equipment. On top of that, the state is enacting air quality regulations designed to force the dirtiest peakers to switch to cleaner alternatives.

That said, actually building batteries in New York has proven difficult, even with an entire state policy apparatus pushing to make it happen.

8minute Solar Energy

At the lead of the pure-play solar developers turning to batteries, we have 8minute Solar Energy. This company has yet to complete a battery project but has added them to enough of its 15-gigawatt utility-scale solar pipeline to beat almost anyone on battery capacity in development.

“Internally, as we look at our portfolio, every project is assumed to have the ability to have storage incorporated into it from day one,” SVP of Development Sean Kiernan told GTM in February.

Highlights include:

  • Southern Bighorn project for NV Energy in Nevada, which pairs 300 megawatts solar with 135 megawatts/540 megawatt-hours storage.
  • Eland project for the Los Angeles Department of Water and Power. This set a record-low power-purchase agreement price for the 400-megawatt solar portion, coming in at less than $20 per megawatt-hour. But it comes with a 300-megawatt/1,200-megawatt-hour battery, too. Capital Dynamics agreed to buy this from 8minute, so it won’t ultimately count toward the developer's asset ownership tally, but it announces 8minute as a member of the battery big leagues.
  • Aratina Solar Center, finalized in June, is 8minute’s first deal with community-choice aggregators in California. It pairs 250 megawatts of solar with 50 megawatts/150 megawatt-hours of storage.

The company is also working on 132 megawatts of standalone batteries.

Broad Reach Power

Broad Reach roared onto the scene just a year ago, and somehow built up an imposing pipeline in Texas, which is still a very challenging market for batteries in many respects.

Unverified promises of gigawatt-scale pipelines don’t count for much in this industry, but Broad Reach quickly added some details. Last month, it revealed it has not one, not two, but 15 projects going live in Texas this year. They’re each 10 megawatts/10 megawatt-hours, sprinkled around the Houston metropolitan area and the West Texas oil town of Odessa. Six could be up and running this summer, just in time to cash in on the annual summer peak season.

Storage developers have, by and large, been afraid to touch ERCOT. The lack of capacity markets in the territory of Texas' grid operator eliminates a trusted revenue source for batteries, and bilateral utility deals aren’t really an option. Instead, batteries must go head to head with other forms of generation, unassisted by supportive state policy.

But if you know the market and are ready to take some educated bets, ERCOT has fewer barriers to entry than much of the country.

Broad Reach took a hyper-localized approach, inserting small, modular batteries into the urban landscape, presumably at carefully chosen nodes where energy or ancillary services will be exceptionally valuable. The small size allows for quick project turnaround. And last year’s ERCOT summer shows immense earning potential for a nimble asset when supply gets tight.

This development shop has backing from oil and gas investor EnCap Investments, private equity firm Yorktown Partners and global energy trading firm Mercuria. That money, and an experienced leadership team, helped Broad Reach hit the ground running. Besides the smaller battery fleet, it’s developing two 100-megawatt systems in central Texas and several large solar-paired batteries in Montana.

Vistra

A few years ago, Texas-based Vistra Energy was already known as one of the largest independent power producers and retailers. Then it did what few companies had attempted: build a large grid battery in Texas.

Vistra added a 10-megawatt/42-megawatt-hour battery to its Upton 2 solar farm, to monetize clipped production that was going to waste. It worked with FlexGen, a developer that quietly built up a portfolio of batteries for secure off-grid or oil-and-gas applications (FlexGen CEO Josh Prueher also serves as CFO of Broad Reach Power).

That project gave Vistra sufficient confidence in the technology to push more chips onto the table: It won a contract from PG&E to build a 300-megawatt/1,200-megawatt-hour project at Moss Landing, a legacy power plant Vistra inherited when it acquired Dynegy. That project is under construction and expected online in December, so Vistra’s ascension to the upper echelons of battery owners will be swift.

Vistra later expanded that project with an additional 100-megawatt/400-megawatt-hour contract, slated to go online August 2021. It’s also swapping a jet-fuel-burning peaker plant in downtown Oakland for a 36.25-megawatt/145-megawatt-hour battery.

Using existing power plants saves time and money on siting and interconnection. And Vistra plans to use its power-trading capabilities to augment the contracted revenue with wholesale market participation. That allows the company to engage in more aggressive bidding for utility contracts.

The subsequent expansions of both Moss Landing and the Oakland peaker reveal the wisdom of early movement on California storage development. Regulators realized last year that the state needed a lot more capacity in short order; companies with battery projects already in motion could quickly expand the scope of those developments to capture the new capacity contracts, as Vistra did.