Utility-scale energy storage procurements face several key risks that can impact project delivery and profitability. Here are some of the main risks involved:
Main Risks in Utility-Scale Energy Storage Procurements
- Supply Chain and Procurement Risks
- Delays and Price Increases: The increased demand for batteries has led to supply chain pressures, causing delays and price hikes. This can result in project delays and increased costs, potentially affecting compliance with regulatory mandates.
- Commodity Market Volatility: The cost of battery metals has risen significantly, adding to procurement risks.
- Technical and Safety Risks
- Battery Fires: Utility-scale systems are particularly vulnerable to battery fires, which pose safety concerns and can lead to additional regulatory scrutiny.
- Technological Evolution: As battery chemistries evolve, safety concerns and regulatory requirements may escalate.
- Contractual and Legal Risks
- Risk Allocation: Procurement contracts must carefully allocate risks between parties, including development, construction, and performance risks. This includes ensuring that all parties have clear responsibilities in case of defects or performance issues.
- Regulatory Compliance: Developers must comply with evolving regulations and safety standards, which can add complexity and costs.
- Market and Policy Risks
- Trade Policy Uncertainty: The potential for more restrictive trade policies can disrupt supply chains, influencing procurement timing decisions.
- Technological Advancements: Rapid advancements in technology may make current systems obsolete sooner, creating a dilemma between immediate procurement and waiting for better technologies.
- Financial and Reputational Risks
- Economic Viability: Delays and cost overruns can lead to economic unviability, loss of performance security, and reputational harm.
- Financing Challenges: With the high risks involved, securing financing can become more challenging, as investors may demand higher returns or more strict risk mitigation strategies.
Addressing these risks requires careful planning, risk assessment, and strategic decision-making in procurement processes to ensure the successful delivery and operation of utility-scale energy storage projects.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-are-the-main-risks-associated-with-utility-scale-energy-storage-procurements/
