Technology has to do it, and productivity comes first. Energy storage sounds easy as a solution for emission reduction or energy saving in the production process, techniques abound. How do you calculate whether the investment is worth it? What decision-making process precedes the investment? Is the investment in storage fundable. ING Bank receives daily requests for energy storage financing. A roadmap for the entrepreneur.
Legal framework
Starting point is that relevant borrower is the most logical party to invest in storage. Collaboration with other chain actors and, for example, (i) pay-per-use or (ii) energy-as-a-service models are worth exploring in many cases. Depending on the production process, the revenue model in storage is generally limited, let the storage itself work on a 24/7 basis and create additional revenue. Storage can be settled on the basis of availability (stored energy), use (energy quantity in or out) and availability in terms of capacity for storage to third parties. Good settlement mechanisms and contracts are important.
Business case
Objectively calculating the business case energy storage is often done via comparison with the benchmark (current technology) and is expressed in kWh consumption. Diesel is expressed in litres, gas in m3 and electricity in kWh. Expressing energy carriers all in Euro per kWh gives an objective comparison between them. The second correction concerns energy efficiency differences in the process. The third correction concerns differences in costs of (intermediate) storage and delivery. The end result of the three steps is called the Levelised Cost of Energy (LCOE). The TCO, Total Cost of Ownership, is calculated over the total energy consumption, purchase and sale, maintenance costs and ancillary costs as long as the technology is owned.
Balance sheet and H&S
Energy storage involves an investment in assets. The investment touches the company's balance sheet, more assets. That balance sheet extension requires more equity to bring the ratios back in line, for most companies balance sheet extension is undesirable. But leasing storage and multi-year use also forces the company to capitalise the investment, again undesirable. Although the TCO may be competitive against the benchmark, balance sheet extension requires attention and alternative structures are quickly sought. The concept of pay-per-use often offers a solution.
Decision-making
Working together sounds nice, deciding together requires robust coordination of the various parties. The bank has confidence in parties who have well established and thought through the collaboration, taking the step together at the same time. Investing risks where they are best understood and managed. When presenting the financing request, providing a good understanding of the LCOE and TCO is of value in assessing the risk to be run. Apart from investment and financing, it is nice to know how much energy will be saved, how much greenhouse gas and how much environmental emission will be saved. That is the societal task to which energy storage contributes. Even if energy storage is slightly more expensive on balance than the current configuration, it is from a societal perspective to seriously explore the energy storage option.
