Key takeaways from the report include the following:
- Batteries between 1- and 4-hour duration can achieve up to 6% and 12-14% IRR respectively in MISO; 4-hour batteries entering IN in 2029 have a promising business case given higher energy and capacity revenues.
- Capacity revenues will be a major revenue stream for batteries in Minnesota and Indiana, contributing ~60% of the total revenue after 2035, while energy arbitrage plays a more important role for battery economics in Louisiana.
- The most successful batteries will optimize for Investment Tax Credit (ITC), nodal spread premiums, and Real-Time participation. Signing bilateral contracts with utilities having ambitious Integrated Resource Plans (IRP) can also enhance cash flows.
- Major uncertainties remain around the MISO seasonal capacity auctions and accreditation methodology reform as well as the interconnection queue reforms initiated by the Federal Energy Regulatory Commission (FERC) and MISO; more updates from MISO due in Oct 2023.
- ELCC and ITC have significant impacts on battery revenues ELCC’s that increase long-term to 100% can increase the IRR of a battery entering IN in 2029 by 18% over a business case with declining ELCC’s while increasing ITC from 40% to 50% can increase the IRR by 25%.
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