A number of major challenges remain for lenders in the energy storage market, including its relative youth.
Speaking at the ‘Lenders approach to energy storage‘ at the 2022 Energy Storage Summit, Mark Cumbo, director of renewable energy at Santander, said during the internal education that there was little real historical data available.
“I think a big challenge we’ve faced in just educating internally is just a lack of historical revenue. We’ve talked to market advisers about the possibility of back-casting and, and how you would have actually performed over the last three or four years, and they do, but that’s not the world real is not real life,” Cumbo said at the event hosted in London this week by our publisher Solar Media.
A lack of historical data can also hamper understanding of a project’s life cycle and impact understanding of asset value as well as revenue streams.
“The useful life of projects, degradation and how batteries develop and how we operate longer, some lenders are getting a little uneasy [with that]because we don’t have that historical data to prove where we are in the cycle,” said Jemma Couchman, partner at independent investment bank Cameron Barney.
“And the different providers can provide forecasts and curves, but we’re still very early on, we don’t really know and therefore some people are quite uncomfortable with that.”
Basically, the more certainty a developer can provide to a lender is essential to securing funding, this includes a number of key elements including minimizing merchant risk by securing contractual revenue.
“The easier you can make it, the more attractive you will be. So bring me a floor if you can,” Cumbo said.
Beyond that, there are other ways to increase security for lenders, said Jacob Lloyd, director of British bank Natwest.
“Relevant experience across all sectors of the space, there are a lot of impactful pieces here. It’s about making sure you have the right developer EPC contracts, the right battery supplier, the right optimizer “, did he declare.
The session ended with a consensus from this panel that lenders should be considered partners in the development of storage projects.
“Keep in mind that lenders are not your enemies. They are on your side. We’ll have to work together to get it,” Couchman said.