GGF’s Canfield: Energy storage projects can be project financed

Project financing for batteries together with a power plant is possible if all parts of the overall investment are well organized, Chad Canfield, Director of Project Finance at Green for Growth Fund (GGF) and Finance in Motion, said at Belgrade Energy Forum 2023.

Financing new wind farms and solar power plants was one of the main topics at BEF 2023, organized by Balkan Green Energy News. Chad Canfield was one of the participants in the panel ‘Major challenges for an increased share of renewable energy sources in the SEE region’.

He said the Green for Growth Fund (GGF) has sent about 50 term sheets for financing over the last three years and that almost all the deals are very close to reaching financial close. But just five or so are in the region of Central and Eastern Europe, Canfield pointed out. It is not only the case for GGF “but the entire bank market,” he added.

Asked what the reasons are, he said every country is a little bit different and that GGF as an impact investor, focused on projects having the most impact. “I don’t know if it’s permitting or something else, but stuff is generally not closing, certainly not at speed that anybody wanted,” Canfield stressed.

Lenders don’t like pictures of people defending their land

One of the situations that slows down projects are rights of way, in his view. It is not good for financing when the farmer and his wife are crying in front of the bulldozers because someone are taking their land, even in situations where a government allowed eminent domain, for instance for installing a transmission line.

“We may have the legal right, but you don’t want those pictures. It is making lenders a bit nervous,” he explained and added arbitration is another big issue.

It is possible to create a model for financing batteries that would accompany a power plant

“Even if there are adequate changes of law, it doesn’t mean that we are always comfortable, so one of the things we have been looking at is political risk insurance for some of our investments,” he stressed.

When it comes to batteries, Canfield said energy storage projects can be project financed but that financing volatile revenue streams is difficult.

There are capacity contracts in the United Kingdom, and they were project financed, he noted and suggested the model could be followed.

When an investor has a power purchase agreement (PPA) for a renewable energy project, it is possible to include energy storage in the overall cost, even if there is volatility in the added segment, and finance everything together, Canfield said.