TerraForm Takes Model Popularized by Solar for Storage Spin

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TerraForm Power Inc., a company formed by SunEdison Inc. to own and operate power plants, agreed to buy 50 megawatts of energy-storage systems from developer Advanced Microgrid Solutions, a move that may lower costs and spur wider use of the emerging technology.

SunEdison will help finance the battery systems and TerraForm will purchase them once they go into operation starting next year, according to a statement Wednesday. The price wasn’t disclosed.

The deal marks the first purchase of power-storage systems by a so-called yieldco, Tim Derrick, general manager of advanced solutions at SunEdison, said in an interview. The model is becoming increasingly popular with renewable-energy companies, with developers selling completed projects to yieldcos and using the proceeds to fund new power plants.

Adding battery systems to a yieldco portfolio “is about accessing a cost of capital that storage projects cannot access today in capital markets,” Derrick said. “This is an important step forward to drive down the cost of storage and to drive higher deployment.”

The transaction shows that storage systems can deliver a reliable, predictable revenue stream, just as long-term power-purchase deals have spurred the development of wind and solar projects, said Susan Kennedy, chief executive officer of Advanced Microgrid Solutions.

Global revenue from energy-storage enabling technologies is expected to total nearly $75 billion from 2015 to 2024, according to a report released Wednesday by Navigant Consulting Inc.

Intermittent Energy

Batteries, in turn, are seen as both complementary and vital to expanding the use of these intermittent power sources, which need to be able to store energy until it’s needed.

“The market is ready,” Kennedy said. “The technology is ready.”

Advanced Microgrid installs battery systems at commercial and industrial buildings and connects them to the local power grid. When electricity demand in an area is high, the buildings can draw from the batteries, freeing up energy on the grid that can be made available to other users.

The company was selected in November by Edison International’s Southern California Edison utility unit to supply 50 megawatts of storage capacity. Its first 10-megawatt system is expected to be installed in Irvine, California, next year, Kennedy said.

Advanced Microgrid raised $18 million in a Series A funding round led by DBL Investors with participation from former California Governor Arnold Schwarzenegger, the company said in an e-mailed statement Wednesday. The company said in June it had agreed to buy 500 megawatts of batteries from Tesla Motors Inc. for projects including the contract with Southern California Edison.