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