BESS sponsors’ returns jeopardised by sites over-reporting availability

• Three out of four BESS sites over-report availability, new report concludes
• Over-reporting resulting in lower-than-expected returns on projects
• Reported availability, on average, overstates what sites deliver by 2.6 percentage points
• A 2% reduction in revenue moves a loan sized at 1.30x debt service coverage ratio to roughly 1.26x
• Industry urged to track actual asset performance rather than contractual or supplier-reported proxies

Three out of four battery energy storage system sites over-report availability, new research has concluded, with the result that financial sponsors’ revenue and opex forecasting is often inaccurate, resulting in lower-than-expected returns on projects.

A report by ACCURE – with support from U.S. Bancorp – which involved analysing millions of readings from 50+ BESS sites across multiple markets, found that reported availability “overstates what sites actually deliver” by 2.6 percentage points on average.

Gap between actual delivery and reported availability can reach 6 percentage points

The report said that median ‘reported site availability’ is 96.7%, “in line with the conventional 97% target”. However, it added: “But those values come from reporting formulae that vary from contract to contract, and often count a component as available whenever it reports an ‘online’ status rather than when it responds.” The report said that counting a component as available only when it participates as the energy management system (EMS) calls on it, the median falls to 94.1%. Consequently, the gap averages 2.6 percentage points, with three out of four sites over-reporting, the research said, and at the tenth percentile the gap reaches 6 percentage points.

Source: www.accure.net/ebooks/banking-bess

The report also explained how such deviations in what assets deliver ultimately end up costing money. Applied to a representative BESS project and financing model, a 2% reduction in revenue moves a loan sized at 1.30x debt service coverage ratio to roughly 1.26x, and “takes about a point off the sponsor’s levered internal rate of return”, the report said.

Not obvious which assumptions will prove realistic

ACCURE said the research had been conducted because, “getting to a solid answer” on whether operating assets actually deliver the availability and energy their contracts assume helps lenders and investors determine whether the asset’s financial model will hold up once the site is operating. The report argued that contracts and documents alone are not enough to deliver real answers. It said long term service agreements (LTSAs), supplier warranties, engineering, procurement and construction (EPC) contracts and revenue forecasts “each define performance on their own terms”. The report continued: “It is rarely obvious which assumptions will prove realistic in real-world settings, and which problems might surface as a site ages.”

The report concluded that real-world availability and capacity “lag the promises and commitments made in supplier contracts and warranties”. It added that, unmeasured, these gaps surface as revenue shortfalls, disputed warranty claims and accelerated augmentation, leading to mismatches between the agreed terms and actual site performance.

To address the issue, the report made three recommendations. It called on the industry to:

• Track actual asset performance rather than contractual or supplier-reported proxies
• Use supplier-independent analytics that allow like-for-like comparisons across portfolios, and
• Implement predictive maintenance to close the performance gaps documented in this report.

Financial sponsors need ‘sharper’ revenue and opex forecasting

Taking such steps would mean assets operate safely and effectively for longer, as well as ensuring “sharper revenue and opex forecasting for financial sponsors, and ultimately more attractive risk-adjusted returns”. The report stated: “Solar and wind operators learned these lessons the hard way, and their assets perform better for it today. BESS is on the same journey, and better data should let it travel faster.”

Earlier this year, it was announced that U.S. Bancorp had financed 0.8GW of battery storage capacity through renewable energy tax credits (RETC) in 2025. In one high-profile deal, the bank was a member of the consortium that financed Clearway Energy’s $605 million Honeycomb portfolio in Utah, which comprises four BESS projects adjacent to an operating solar energy portfolio owned by Clearway. Each 80MW project will use four-hour Tesla batteries and collectively store up to 1,280 MWh of dispatchable power.

Commenting on the report’s findings, Scott Butin, vice president, infrastructure finance at U.S. Bank, said: “As the energy storage market continues to mature, access to high-quality operational data is increasingly important, and independent research can help inform industry discussions, improve understanding of battery storage performance and support the continued growth of the market.”