U.S. Investment in Battery Energy Storage Systems Shows No Signs of Slowing Down

Battery energy storage systems (BESS) store power when supply outpaces demand and create redundancy or balance for a more resilient grid, a valuable asset in places like California and Texas, which have been plagued by power issues in recent years. Given the U.S. government's commitment to achieving a carbon-free power sector by 2035 and a net-zero emissions economy by 2050, we think investment in BESS is likely to intensify. Here are our key takeaways:

-- BESS are a critical piece in the transition to increased reliance on renewable energy serving the power grid.
-- We expect the rate of investment in BESS to continue to increase as the power sector becomes more reliant on intermittent renewable energy generation.
-- Federal support in the form of tax credits under the U.S. Inflation Reduction Act create complimentary incentives for investors and developers.

"As intermittent renewable energy generation overtakes baseload fossil fuel generation, we expect investment in BESS to play an active role in the transition," said Joshua Moews, Assistant Vice President. "From a project finance credit ratings perspective, the degree to which capacity, ancillary, and arbitrage revenue can be contracted through power purchase agreements or tolling agreements will drive credit quality."