Intro: Welcome to The Energy Shift, a podcast series focusing on the rapidly evolving energy landscape with hosts Luisa Fuentes and James Wright.

James Wright: Good morning, Luisa, how are you?

Luisa Fuentes: I’m doing great James, how about yourself?

James Wright: Fantastic. Made it home from New York last night despite the storms. So it’s all good.

Luisa Fuentes: Yeah, it’s been a cool September weather here in New York. Not bad.

James Wright: It’s lovely. All right, so let’s get into it. In today’s episode, I think you and I are going to chat about batteries, which are rapidly becoming a real mainstay in our grid, solving for load at utility scale across many of our RTOs. We’re releasing and being procured at scale and often being co-located with both new solar PV capacity and the standalone installations in their own right. In our world, we’ve seen them as being very unique in that they can also revenue stack and act in various usage cases depending on the local markets and the revenue streams available to them. Batteries are also increasingly a diverse technology with many providers across a spectrum of different chemistries and one way someone described this to me a while ago that I found really helpful was to think of them a bit like track athletes. Good with an Olympic analogy here. That there is some who are more kind of distance runners for your long duration applications and others who are more like sprinters that kind of come out the blocks fast but tail off pretty quickly. So with that, Luisa, before we get over to our guest today, Denise and Ines, any thoughts you want to add on what’s piquing your interest on the battery side?

Luisa Fuentes: Yeah, I would just try to put it into some context. The latest deployment figures are really impressive. According to Wood Mackenzie, for the first quarter of 2024, battery installations were up 84% year over year from 2023 with about 1.2 gigawatts in capacity installed. That’s equal to about 3.2 gigawatt hours deployed. I would also point out that the three states which dominate the installation market were California, Nevada, and Texas. To me, this further highlights how states with really varying approaches to transition are all leaning into storage. With that, I’m really excited to have Denise with us. I’ve known Denise a long time. I’d be very interested in Denise’s thoughts on the growth of the sector and how she anticipates the next 12 to 24 months to look like in terms of demand maybe also some insight into how supply chain issues are expected to play a role, if at all.

James Wright: Absolutely. That’s a great tee up. So that’s bringing in the guests. So we have two fantastic folks joining us today. We have Denise Tait and Denise has recently been appointed CIO of Arevon, who is a leader in this space. Previously, she was with Starwood for about five years and GE Capital for about 24 years before that, So fantastic wealth you’re bringing to our conversation today. And Ines is a Managing Director with us at CIBC, head of our renewable energy platform for US Corporate Banking. She’s been with us about six months now. And I think fair to say, Ines, you’ve been drinking from a fire hose during that time. Is that right?

Ines Serrao: Yes, hi James, hi Luisa and Denise. It’s been great so far. CIBC has been a wild ride and I’m enjoying it very much so far.

James Wright: A wild good ride, right? (laughs)

Ines Serrao: A wild, fantastic ride.

James Wright: Good clarification, excellent. Great to have you, Denise and Ines, thank you for coming both onto the podcast today. I’ll hand it over to you, Ines, I know you’ve got a few burning topics you want to get right into with Denise.

Ines Serrao: Thank you, James. Hi, Denise. It’s great to have you in the podcast. Arevon has been one of the leading developers of battery storage in the US. And I know you had a growing portfolio in California in particular, which we’ll probably get into a little bit later. But I was hoping you could start by giving us a sense of the scale of your battery storage business at Arevon, your geographic footprint, and how your initial days at Arevon have been so far.

Denise Tait: Well, thank you all for having me. I’ve been at Arevon now since April 22nd. So I’m a newbie at Arevon. Arevon is a renewable IPP. So we have solar, solar plus storage and standalone storage. One thing I don’t think folks realize is we’ve actually been operating standalone storage since 2021 with zero incidents. So we have a really good track record with battery storage. We have four gigawatts in operation and that’s across 17 states. And then as you mentioned, California. So out of that four plus gigawatts, two and a half are in California, and in addition to that, we are constructing another 2 gigawatts. And out of that, 1.2 is in California. So we have a big presence in California. And then after we finish constructing those 2 gigawatts, our split between solar and storage will be about 80/20. And then we also have a pipeline of about 6 gigawatts. So our presence again in California is pretty big. And just recently, we had the ribbon cutting at our Condor Energy Storage project in San Bernardino County. So that was really exciting for the team. And it’s really important having our team on the ground in these areas because it’s really important to have this outreach with your local community because of some of the safety concerns around batteries. And again, that goes back to having zero incidents with our exceptional safety records.

Ines Serrao: That’s fantastic and great to hear that you have such a good track record in the past years since you’ve started this business. And for listeners who aren’t quite so familiar with the battery storage market, maybe a good way to get into the topic a little deeper would be if you could give a sense on why Arevon, as a traditional solar developer in the early years, expanded your asset base into developing both solar plus storage as well as standalone storage projects. What was the business or technological driver for that?

Denise Tait: So first of all, I’ll just talk about the broader reason for storage and as we add renewable resources onto our grid, which are intermittent, it is beneficial for the grid to have storage along with those intermittent resources. And I think we’ll continue to see that build out of storage. With our presence in California, and California was definitely a leader in the storage business. They set up a market that made economic sense and therefore these battery projects were penciling out. We saw this emerging opportunity in California capacity market. We worked early on with a development partner. And so we secured these high value interconnection positions really before the queue was flooded. So being a first mover in California is one of the reasons why we have such a big presence there.

Luisa Fuentes: One of the things I focus on a lot is the variety of chemistries that are available in the battery space, both for shorter duration, longer duration, everything in between. Even within the lithium family of chemistries, there’s just a huge range of derivative technologies, lithium nickel manganese, lithium iron phosphate, lithium nickel cobalt. I’m not going to attempt high school chemistry here. A shout out to Mrs. Sandini, my AP Chem teacher at Marlboro High School. But from an investor perspective, I’d be curious as to which technology solutions you’re looking at. What are you focusing on? Do you worry about obsolescence risk? Your comment on chemistries would be helpful.

Denise Tait: Yeah, definitely. And look, I’m not going to go back to my high school chemistry either, but from a broad sense, we look at reliability, finance ability, and having a strong track record, especially as it pertains to fires, because I think that’s a big concern in a lot of these communities. What we have in our portfolio is the lithium iron phosphate batteries, the LFP. All of our projects utilize the Tesla MegaPak. They have a great track record. Our team does a really good job presenting to the local communities on the safety track record of these specific batteries too. And the reason that we’ve chosen the LFP chemistry is because they’re more stable, they’re cost competitive. And this is really the leader in the two to four hour utility scale batteries. You have a Venn diagram and that’s where this technology and the market overlaps. So this is where we focused. With that being said, the team at Arevon is spending a lot of time researching and looking into various long duration storage technologies because as I had mentioned, as the grid continues to add these intermittent resources, adding more batteries, dispatchable resources is going to be really important. So I think we’re just going to see more growth in the battery sector. I mean, choosing what we think is a top battery can help with any technology changes. And a lot of our projects, we have solar plus storage, we have Vikings, which is really a peaking plant because the battery, there’s a very small solar project adjacent to it. And all of that power from the solar project is feeding into the battery. We need more batteries, not less. So it’s not easy to develop projects, right, in certain areas. I don’t think that you’re risking these assets because of other technologies coming on. I think you need these other technologies because you need that much more power than dispatchable power.

James Wright: I’m making a mental note, if there’s any IEs out there who want to come and give the bankers a high school chemistry refresh, we’ll happily take applications. But just pivoting, from chemistry to math in one sense, maybe we could get onto the revenue side of what you’re seeing and some of those projects that you were talking about. Particularly if we think about the usage cases for these batteries and what you’re doing with your business, one of the additional complexities and also frankly opportunities we’ve seen with these systems is the ability to monetize different value propositions on the grid. Capacity, arbitrage, frequency response, balancing, et cetera. How are you and your investors thinking about those? Are there particularly usage cases that from a risk appetite or even back on the technology side perspective you’re sticking with or others you’re more bullish about? How you thinking about those?

Denise Tait: Yeah, and it really does start with the investor mindset, right? So our investors are pension and sovereign wealth fund investors. They’re long term holders of these types of assets, the solar storage, and they’re looking for certainty in their revenue streams. You’ll have other investors that are looking for bigger pops in returns. So they’ll take more of a merchant view. they would be attractive to markets that have higher pricing in the real time that they could capture. But what we’re looking for is to be in markets where we have a stable revenue stream through contracted capacity revenues. California, we have resource adequacy. And then we take into account near term what we consider reasonable and predictable arbitrage and ancillary services, which are your revenue up here. Your rev up, your rev down, and all of your various balancing products. And then we can look at a predictable revenue stream on these assets and then we have an appropriate risk adjusted return on these assets. Again, we’re looking for nice stable returns and not big spikes. So that’s going to drive the market that we’re going to be focused on, hence California.

Ines Serrao: That’s certainly very helpful for you as an investor as well as for banks that are looking to help you finance the projects as you think about the revenue profile. Thinking about a different but very topical risk is the heightened point on the political cycle we’re in and the recently announced section 301 tariffs. Lithium-ion batteries could see their tariffs going from 7 to 25 percent in 2026. How are you thinking about this affecting projects in your pipeline as an investor and how does that factor into your supplier relationships?

Denise Tait: So there’s a lot to unpack here. Living in a country where we have elections every four years, this is something that is more common, to deal with than just one off. So at Arevon, we have a great procurement team and we also have a governmental affairs team. And it’s really important with the procurement team to build these really strong supplier relationships. I will say this is where size matters too, because the size of Arevon, not only in our operating portfolio, but in our pipeline and our in construction assets, that’s how you build really strong relationships too. Because these suppliers are it’s easier for themto sell in bulk. So having a larger developers is much easier for them too. But having the teams that have worked in the industry for a number of years and they’ve come from places like First Solar and some of our other suppliers, that that is how we build those relationships because it is a very fluid relationship on pricing and as other things come into the market. As it pertains specifically to the Section 301 tariffs, what we’ve seen in the battery space is this dramatic drop in lithium pricing. So that has brought down the pricing in the batteries. We also have a commercial team inside Arevon that is signing up each of these projects. So we have a not as big of a risk as when you look at offshore wind when they have to sign up PPA so far in advance and they’re taking a lot of pricing risk. There’s a much shorter timeframe here so we can react to some of these changes. So if the drop in the lithium battery prices isn’t covering tariffs, then you have to look at your PPA pricing, maybe you have to amend it. But all the teams are working together to make sure that these projects pencil out. But again, with this drop, it would definitely cover any increase because of tariffs. And the battery projects, the other point I want to make is you have to buy the batteries upfront. And so you’ve locked in that price on the batteries and we try to source them domestically too. So that can also limit the tariff risk. Then you have your known inputs into your project. And then again, it’s really just executing on the construction portion of your project.

Ines Serrao: Shifting gears a little bit, it feels at least from where we stand that the battery storage market is hyper local with different support mechanisms in various RTOs. In fact, we spend a lot of time diligencing the specific support from the several RTOs so we can be on track on what’s going on in different markets. From your perspective, are there certain RTOs which you feel have been the most progressive in terms of developing regulatory support for storage systems? And would you say that there’s a case for overarching federal support given what we’ve seen on the transmission side?

Denise Tait: I completely agree on the hyperlocal and I’d say it even goes more local than that, that you choose your RTO based on those facts that you pointed out and then you have to go county to county because it really goes down to the community support at the county level and spending time and forming these local communities. I keep going back to the safety track record. It’s really important to spend the time in the local communities to educate folks on these batteries. And you also want to be a good developer, a good neighbor. We want to limit the impact on the landscape and of course manage any impact on local wildlife. So building those relationships at the community level is really important. The revenue stream is really important too. So evaluating the congestion and load forecast and the supply stack to identify these appropriate locations. But going back up to the ISO level, clearly KISO was a first mover and that’s why we focused on that ISO early on because of their robust structure through its resource adequacy program for storage. And I believe KISO has the most best projects and that’s really because of that program they have in place. Another area that we find interesting and we’re still waiting to get more details on the credit, is New York ISO. They’re very focused on meeting their goals by 2030. they have this energy storage roadmap 2.0 and the program is going to be structured like the New York CERTA REC program. We’re waiting for more details. But we think that could be an interesting ISO to build out some battery storage. PJM is very interesting. we just saw this extremely high print in their capacity auction. I think it took a bunch of folks by surprise.a lot of folks thought it was going to be higher, but not to that extreme. The high pricing was partly driven by storage and some renewable assets not bidding. And that’s because they would have been held at a zero offer price due to their marginal cost. But then they’d still be at risk for the huge non-performance penalties. So there’s a big mismatch there. My thought there is that there will be some changes to that by PJM. ERCOT is, I was referencing this before and one of James’s questions was, some investors want to capture some really high pricing. that’s what you see in ERCOT because you don’t have any capacity market. And so they’re looking for that peak pricing to earn back their money. It’s a different risk profile. You’re probably more an investor that’s more comfortable with a merchant profile. Just SVP and WAC, they need more capacity, but there’s no clear revenue structure. In MISO, we have projects that we’re building out in MISO, but not battery storage. Our projects, when we’re looking at them to build them, if they’re solar only to begin with, we do look at keeping some optionality for eventually adding batteries because some of the markets could add on some revenue streams that could make these projects pencil out. And I think everyone will acknowledge that transmission in the US, it’s aged, there’s a lot of issues with it. Having these individual ISOs, we’re not seeing really good coordinated effort on transmission planning across ISOs. Obviously, take MISO for example, it has teams with PJM and SPP. There’s a little being done that’s cost-effective, I’ll call it, for battery storage that would increase transfer capability across SIEM. So that indicates to me that there is a case for some overarching federal support. But again, it depends on where that falls on the list. And that’s such a big undertaking that even if I think there would be some, I don’t know if someone would actually take that on.

James Wright: I was thinking while you were speaking, you managed in about 20 minutes or so to touch on everything from regulatory to tariffs to revenue to technology. There’s a lot there to unpack and we will have to get you back on for a deeper dive on some of those. To wrap this upeach week, we try and wrap up the episode. We’re just talking a little bit about what shifted all of our weeks. Luisa, do you want to kick us off?

Luisa Fuentes: Sure. It’s intern season in New York in the summer. And we’re just about to wrap up our intern season. I’ve had the privilege of speaking to many of the interns that have come through and I’m just very excited about the combination of idealism and pragmatism that they’re embodying and being really thoughtful about, not having knee-jerk reactions on what sustainability looks like and having a broader view of, we need solutions like batteries, which obviously involve lithium mining and the complexities that come along with the transition. So there’s no easy answers and there’s not one single answer. But as I look to the future and the future leaders of our industry and our country, it’s an exciting time.

James Wright: I would totally second that. The level of enthusiasm amongst that generation is just, it’s really awe-inspiring. Denise, what about you?

Denise Tait: Well, mine is probably a little bit more personal as I am packing up my oldest daughter to go off to college next week.So it has been a really exciting time. And it’s somewhat in line with what Luisa mentioned. And, you know, it’s exciting when you see this transition and seeing your child go off, to their next big adventure. And I do get excited because there is this hope and excitement that we all want to keep in our day-to-day lives. I mean, what we work on is really exciting and it will change the landscape and it is crucial for our economy. So all good, but it’s mixed feelings sending her off.

James Wright: That’s fantastic. We’re a couple of years behind you in parenting terms, Denise, but I tell you, we’re one of those parents who are breathing a sigh of relief as the kids are going back to school next week. Life returns to normal, right?

Denise Tait: Yeah, exactly.

James Wright: That was great. Ines, what about you?

Ines Serrao: It’s hard to follow Luisa and Denise’s very deep both professionally and personal sides of the spectrum. I’ll go with a personal one, but a lighter one. My major shift this week was that yesterday night I took the red eye from New York to the Azores. So I’m currently looking at a wonderful and peaceful ocean landscape in front of me. So it’s going to be great to reset and go back to work next week.

James Wright: How can we beat that?

Denise Tait: I want to be there. (laughs)

James Wright:. Yeah, all right. So I’ll wrap it up. I think what a shift in my week. Maybe unfortunately a bit of a kind of down low, but just an interesting data point. And I guess milestone in our industry was the news about SunPower filing for bankruptcy. And, for those of us who’ve been in this space a long time, it’s a name that goes back a very, very long way, all the way back to the seventies, I think. I think all of us on this podcast can remember some key milestones that company had in our space, like when Total came in and bought them back in the early 2000s, which was a huge move by a big international oil and gas major. And then they were a really big early mover in the Yuleco space in their joint venture with First Solar, 8.3, that Yuleco. And then since then, the market’s become a lot more competitive, particularly on the residential side. And it seems from what I was reading, it was really financial and accounting challenges that brought about their eventual demise. But I love this quote from TJ Rogers, who’s the CEO of Solaria, who was talking about this in the press this week. He was saying the solar industry is all about bare knuckle cash flow, live or die economics, which I think is a great way of summarizing maybe part of their journey. And I guess the solar coaster continues. So that was big news, this week in our space. So with that, We’ll wrap up this episode. Thank you so much, Denise and Ines. That was a really great conversation. We could have gone on a long time. I think it really reminded us all about the acceleration that we’re seeing in the storage space and some of the fun stuff you’re doing on your side, Denise, at Arevon and the impact batteries are having on our power markets. So thank you both again for coming on and thank you for listening. Have a great week.

Ines Serrao: Thank you.

Denise Tait: Thank you.

Outro: Please join us next time on The Energy Shift as we continue to tackle some of the hottest topics in the US energy transition landscape, providing fresh insights and viewpoints to help you shift your perspective.

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