Evolution of BESS Procurement
With the cost of procurement of equipment and development of BESS facilities being a much larger consideration and having a much larger impact on the business case and ultimate success of BESS projects as compared to traditional renewable assets, it is understandable that a greater focus is placed on project cost and the strategies to control development and construction costs.
Our recent experience is that split contracting is emerging as a viable alternative to the turnkey EPC model and has the potential to unlock significant value in BESS projects for developers.
The primary driver behind the adoption of this strategy is to reduce the construction cost required to develop a BESS project. Instead of a turnkey EPC contractor covering all aspects of the development of the project, key elements involved in the project development are split across a number of contractors. The most common approach being adopted is to split the procurement of the BESS equipment, on one hand from the installation and civil and electrical works on another. Focusing on the procurement of BESS equipment, a developer is able to approach the market solely for the supply of the component pieces of the BESS facility( i. e., the required battery units, inverters, energy management systems, etc.), noting that, depending on the approach of the developer, each of these components could be procured through one or more suppliers. A potential benefit to this approach is that it could afford developers the opportunity to leverage existing relationships with equipment suppliers.
In parallel with the procurement of the required equipment, the developer is able to approach one or more“ balance of plant” contractors to provide services required to install the BESS equipment, construct the necessary civil works in relation to the plant and provide for the electrical connection works in linking the BESS facility to the grid.
Recent Notable Matters
• Rabobank— project financing the 49.5 MW battery energy storage system( BESS) project to be developed by Cero Generation and Enso Energy and co-located with the 49.9 MW Larks Green solar farm located in Gloucestershire, England
• Helios Energy Investments— set up of a platform for investments into UK battery storage projects, including shareholder arrangements with the developer, and due diligence and support on the acquisition and developments of battery storage projects
• Fotowatio Renewable Ventures— advising FRV on the project financing and development of UK battery storage assets with a combined capacity of 133 MW
• Matrix Renewables— advising Matrix on its arrangements with a developer in respect of acquiring and developing a portfolio of UK battery storage projects
• Fotowatio Renewable Ventures— joint venture agreement with Tyler Hill and related arrangements with developers in respect of acquiring and developing up to 1GW of UK battery storage projects
• EWEC BESS— acting for the lenders to Engie’ s for 400 MW EWEC battery storage projects
The Year Ahead
These savings present developers with a genuine decision to make on which structure may be best. However, with more rewards also comes more risks, and developers and their lenders looking to implement a split contract strategy will need to be cognisant of these risks. bracewell. com