Mitigating Technology Risks
- Performance Guarantees and Equipment Warranties: These agreements shift technology risks from the project company to the technology vendors. They provide assurance to lenders that the equipment will perform as expected, thereby reducing overall risk exposure.
- Independent Engineer Reports: Lenders often rely on these reports to assess technology risks and ensure that projects meet minimum performance requirements. For technologies like lithium-ion batteries, these reports are particularly crucial for evaluating capacity degradation and safety issues.
- Fixed-Price Turnkey EPC Contracts: While not always used in energy storage projects, such contracts can help shift construction risks to a single contractor, making the project more attractive to lenders.
- Operations and Maintenance Agreements: These agreements ensure that experienced operators manage the project, minimizing operational risks and ensuring that the project operates within its limitations.
- Software and Intellectual Property Rights: Ensuring that the project company has access to critical software and IP rights allows for smoother operations and reduces the risk of disruptions in project management.
Additional Considerations
- Revenue Certainty: Projects with stable revenue streams through long-term offtake agreements are more attractive to lenders than those reliant solely on merchant cash flows.
- Tax Credits and Incentives: Utilizing tax credits, such as those provided by the Inflation Reduction Act in the U.S., can make projects more appealing to lenders by reducing costs and increasing profitability.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-can-energy-storage-projects-mitigate-technology-risks-for-lenders/
