The main barriers to project financing for energy storage projects include:
- Technical and Perceived Risk:
- Energy storage technologies, particularly those beyond lithium-ion batteries, are still evolving and have limited operational histories, which raises technical risk concerns for financiers.
- The perceived risk associated with these technologies often leads to more stringent financing terms.
- Revenue Uncertainty and Complexity:
- Unlike solar and wind projects, which generate electricity directly, energy storage projects rely on complex revenue streams such as arbitrage, wholesale trading, capacity markets, and ancillary services.
- These varied revenue streams introduce volatility and uncertainty, making it challenging for lenders to assess long-term revenue viability.
- Supply Chain Risks:
- The reliance on components sourced from international markets (e.g., batteries from China) poses risks of supply chain disruptions.
- These risks can delay project timelines and increase costs, further complicating financing.
- Regulatory and Execution Risks:
- Evolving regulatory frameworks and changing market rules can impact the value streams of energy storage projects.
- Execution risks, such as cost overruns and permitting issues, also contribute to the challenges in securing project finance.
- Lack of Standardized Financing Models:
- Historically, energy storage projects have lacked a standardized approach to project financing, which complicates lender assessment and project viability.
- As the industry grows, the development of successful financing templates will be crucial to expanding project finance availability.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-are-the-main-barriers-to-project-financing-for-energy-storage-projects/
