by Julian Spector
June 24, 2020

This is the third installment in our countdown of the top five front-of-the-meter battery owners in the U.S. The first two focused on utility companies: Duke Energy and San Diego Gas & Electric. This installment profiles Invenergy, the independent renewables developer that veered into storage development early on. 

Renewables developer Invenergy used the capital and know-how it built up from years of leadership in wind development to plant an early stake in the large-scale energy storage market. 

Whereas regulated utilities like Duke Energy and San Diego Gas & Electric have an advantage in monetizing uses for storage that may be unavailable to independent developers, Invenergy takes advantage of a wide degree of flexibility in where, when and how it builds grid batteries. 

That operational freedom meant Invenergy entered the market early at scale — it built two 31-megawatt plants in the PJM merchant market back in 2015, when that scale was unheard of outside Duke’s grant-funded Notrees facility. As the company says on its project map website, “While others talked, we began to build.”

But in 2019, Invenergy proved it’s not just a lone wolf of energy storage. It executed a 1-megawatt/4-megawatt-hour build-transfer project in Iowa with MidAmerican Energy, a subsidiary of billionaire Warren Buffett’s energy empire. More significantly, Invenergy secured major contracts with utility Arizona Public Service to turn the Arizona solar surplus into evening peak capacity. Those projects, however, are stuck in a holding pattern while APS wraps up an investigation into an existing battery that caught fire and exploded in April 2019.

But Invenergy has big things in the works overseas: an 80 megawatt-hour battery system at a solar development in Latin America.

Early start

Invenergy’s energy storage asset ownership grew out of its bustling wind, gas and solar development expertise. Back in 2015, the only way to build massive batteries was to go it alone.

“Early on, our consumers were not comfortable owning this equipment,” said Kris Zadlo, senior vice president in charge of energy storage. “We saw it not only in storage but...[also] in wind, in solar.”

The first two batteries served PJM’s fast-frequency-regulation market. Grand Ridge sits 80 miles southwest of Chicago, Illinois, and Beech Ridge is in West Virginia, southeast of Charleston. Five years of runtime on those systems gives Invenergy the kind of operational experience that many major utilities are still proposing pilots to gain.

“We know what to look out for in order to extend that useful life,” Zadlo said. “That only comes through operational history [and] tough lessons learned.” 

The subsequent four years without major announcements reflected the general state of the front-of-meter storage market — or lack thereof. The action shifted away from PJM following market saturation and rule changes that dampened returns for frequency regulation batteries. 

California utilities started procuring massive battery plants, but Invenergy never spent much time on renewables development there. Its only asset in the state is a 6.3-megawatt solar array in San Diego County, built in 2014. Invenergy chose not to invest in energy storage there either. 

The California market's complexity has dissuaded developers that aren’t already active there from diving in with batteries. Early storage asset owner Duke Energy Renewables similarly chose to stay out of the complex California market, citing the excessive amount of merchant risk required to win competitive contracts with utilities. Conversely, power company Vistra Energy used its portfolio of thermal plants as a springboard for major battery projects in the state.

Instead, Invenergy focused on Arizona, correctly anticipating that the solar boom would generate considerable value for storage a few years down the road. Invenergy had an executed interconnection agreement in the Phoenix area by the time APS launched its request for proposals. The developer won a power-purchase agreement for a 50-megawatt system in Maricopa County, plus build-transfer contracts for 140 megawatts attached to APS utility-scale solar plants.

“We always want to own and operate it; that would be our preference,” Zadlo said. But, he added, “We want to work as partners with utilities, and depending on their needs, we’re flexible.”

Translating expertise from renewables

Invenergy's corporate history developing renewables plays into its storage strategy. On the practical side, “We have a lot of experience sourcing inverters,” Zadlo said. 

Years of acquiring and operating inverters for wind and solar plants inform the choices his team makes for battery project power electronics. Inverters can get overlooked in battery development, he said — they may get outsourced to an engineering, procurement and construction contractor or picked out by the battery vendor to keep costs down. But his experience shows how central they are to the economic functioning of a battery plant and its ability to perform over many years.

Pairing storage development with existing activity in wind and solar development yields tactical benefits as well, compared to developing storage in isolation. If the company already has boots on the ground in an area, it can take advantage of operating personnel to lower the cost of a new storage project relative to competitors.

This advantage extends into the supply chain. Invenergy already has contractors in the manufacturing hubs of Asia that evaluate vendors, and internal staff regularly visit to assess new supply partners. 

“That’s the only way you're going to know what you're buying,” Zadlo said. “Not only do you get a better price, but more importantly, better quality.” 

And then there are the projects that force developers to blend these areas of expertise.

“We’re seeing a change in a lot of the [requests for proposals] that are being issued,” Zadlo said. “Before, people were not asking for storage, but now they are, as a tagalong to the solar RFPs."

In an unusual structure, Zadlo runs both the storage business and Invenergy’s regulatory affairs team. There’s a fair degree of crossover because regulatory efforts to define the rules for storage participation in wholesale markets are key to opening up new markets for the technology.

In fact, it was regulatory analysts that first spotted the battery business opportunity when PJM created the fast-frequency-response market. Years later, that original market has largely dried up, and the storage industry is still waiting for regulatory developments to clear up the competitive landscape for batteries in the grid more broadly.

“We’re just frustrated with the slow pace of change,” Zadlo said. “It doesn't need to be this slow; it doesn't need to be this complicated.”

If and when clear regulatory pathways emerge for batteries to participate in all the U.S. wholesale markets, Invenergy stands to leverage its nationwide development footprint to strategically place new batteries into the mix.