Energy 2/26/2015 @ 9:03AM
http://www.forbes.com/sites/peterdetwiler/2015/02/26/the-storage-industry-learns-from-solar-third-party-financing-a-growing-trend/2/
PETER KELLY-DETWILER
This morning, ViZn Energy Systems - an energy storage company with a zinc iron redox flow storage technology announced that it was teaming up with LFC Capital to improve the financing options for solar PV and energy storage. The companies will make available up to 5 million per project.
The LFC financing program will involve a traditional operating lease, with options to own after six or seven years, as well as 'tax efficiency.' The two companies have identified the ideal project size as being a solar PV installation between 50 kilowatts and one megawatt, complemented with between 80 kilowatt-hours to 500 kilowatt-hours of energy storage.
The financing will be made available to qualified entities in all 50 states (though Alaska would seem an unlikely prospect). LFC is no novice to the energy finance business: it already offers operating leases starting at 100,000 to companies wishing to eventually own their solar systems.
This announcement is interesting on two levels, as it illustrates the growing trend of combining solar and energy storage technologies, as well as an increasing level of third-party financing moving into the storage game.
Solar + storage = an increasingly frequent value proposition
ViZn is not alone in combining solar and storage projects. In its February earnings call Tesla's CEO Elon Musk announced the impending release of a consumer lithium ion battery for home storage. And last fall, SolarCity SCTY +0.89% CTO Peter Rive announced at the Energy Storage North America conference that a combined PV/storage offering was in the works as a future standard product offering. Meanwhile, other companies like Solar Grid Storage and Intelligent Generation are offering their own solar/storage combinations with different business models.
As costs of both solar and storage continue to fall, we will see many more announcements concerning the convergence of the two technologies.
Solar + storage + financing = even better
ViZn CEO Ron Van Dell notes that the combined solar/storage product lends itself particularly well to financing because both solar and storage scale easily.
You have to have the inherent product attributes that are consistent with these types of projects. You can't have a cool financing tool with a product that isn't simple or doesn't scale well. The hardware aspects of deployment match up well with the kinds of projects that this kind of financing collaboration is targeting.
His company is not alone in this regard. Solar City is offering lease financing for a combined solar/storage offering. Storage company Stem recently announced a 135 million financing pool to help advance on-site customer storage projects. And GreenCharge networks announced an infusion of 56 million in third party financing last July from company K Road DG.
Van Dell notes that this trend is only going to grow.
It is echoing exactly what happened in solar, but we are hoping to accelerate...A lot of people who have been associated with the solar food chain are now doing solar plus storage... There are some fundamental economic reasons for that. You will get better economic returns from PV and storage, and you are more friendly to the grid you are connecting with. So why wouldn't you extend financing to both?
ViZn's redox flow battery (the company has an 80 kilowatt/160 kilowatt-hour module, with a 200 kilowatt/600 kilowatt-hour module out soon) positions the company to develop larger projects.
The financing offered by LFC allows the company to target a specific market that Van Dell feels is under-served, that is too small for a power purchase agreement, and has typically not had the financial wherewithal to access solar and storage.
We think there is a parade of opportunities in the mid-size market that typically have not been able to be done via a financed approach and now will be able to - and that's a large part of the market. It's also a diverse and early adopter part of the market as well.
He observes that as storage becomes more commonly deployed, some customers will want to do it themselves, even assuming responsibility for operations and maintenance, but others will prefer a storage-as-a-service type approach, with the flexibility of payment over time. In the end, Van Dell believes the financing will greatly help move product to market.
It really accelerates early adoption to be able to combine a very simple-to- deploy product with very straightforward financing options as well. It makes adoption easier.
Image: ViZn Energy Systems - will financing help move the needle on storage volumes?
ViZn has just entered its production phase and is now shipping product domestically and abroad, with the expectation that up to a third of its business in 2015 will be supported through this financing arrangement. The company expects to install dozens of projects this year and Van Dell is optimistic that the LFC financing option will help considerably.
"It's looking like the right thing at the right time for us."
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