LevelTen Energy introduced a new type of financial contract to give corporations and Load-Serving Entities easier access to the economic and risk-reducing benefits of energy storage projects. Called the RE-Store Energy Agreement and developed in collaboration with EnergyGPS, it opens the door to billions of dollars of investment in large-scale energy storage projects by providing buyers a practical way to contract with storage developers, and by guaranteeing a revenue stream to developers to support project financing.
PPA independent: Storage, at scale, is key to enabling the transition to a grid powered by 100% renewable energy. The RE-Store agreement was designed with the flexibility to complement a renewable energy power purchase agreement (PPA), whether existing or planned, or to be executed independent of any particular energy generation project or PPA. Either use case dramatically simplifies the storage procurement process and increases buyers’ options by orders of magnitude.
Just as virtual PPAs ushered in a wave of corporate investment in wind, solar and other renewable projects, LevelTen’s RE-Store Energy Agreement is poised to catalyze investment in utility-scale storage projects. LevelTen sees these three main benefits to buyers:
1. Reduced Portfolio Volatility: Because the economic value of storage is often inversely related to that of a renewable energy PPA (i.e., it has a tendency to perform well—or generate a positive cash flow—when a PPA contract does not, and vice versa), LevelTen’s RE-Store Energy Agreement can serve as a hedge, complementing existing renewable energy contracts and reducing the cash flow volatility of a buyer’s energy portfolio. The agreement is particularly effective in markets with high (or rapidly increasing) renewable energy penetration.
2. No Operational Risk: With a RE-Store Energy Agreement, the developer receives a guaranteed, fixed revenue stream and, in exchange, pays the buyer the difference in value between the highest and lowest hourly prices that occur in the wholesale energy market each day. But because the agreement is a purely financial contract, buyers don’t take on the technology risk or operational responsibilities of a more conventional storage procurement. Instead, buyers receive payments based on how an optimized storage project should have performed, not based on actual performance, while also avoiding accounting triggers.
3. Flexible Locations: Because the RE-Store Energy Agreement is settled financially, not physically, the storage project doesn’t need to be co-located with an energy generation project. The structure allows buyers to select storage projects with the best economics, rather than simply accept the storage project that happens to be co-located with their renewable energy project.
“Though the cost of utility-scale storage has plummeted in recent years, and many utilities and load-serving entities are investing in storage to support their operations, the industry has thus far lacked the transaction infrastructure to deliver reliable value streams to both storage buyers and storage owners,” said Bryce Smith, Chief Executive Officer, LevelTen Energy. “LevelTen’s RE-Store Energy Agreement closes this gap by delivering a guaranteed revenue stream to developers, which is key for project financing. Furthermore, as a financially-settled contract, the agreement affords storage owners full operational control, allowing projects to optimize all asset revenues, including capacity and ancillary services.”
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