Jon Powers: Welcome back to Experts Only. I’m your host Jon Powers and today’s episode is actually a live panel that we recorded at the Energy Storage Summit USA March 3rd and 4th in Fort Lauderdale. It was an interesting dialogue amongst a variety of industry leaders about what’s going on in the space. Our panel specifically focused on accelerating US storage and unlocking hybrid projects and you’ll hear from a variety of industry leaders who we’ll sort of introduced throughout the discussion. Enjoy. Jon Powers: Excited to be here today talking about accelerating US storage and unlocking the hybrid markets. We’ve got a really fascinating podcast and panel here with some leading experts from the industry. What’s really been interesting that’s come out of, and we heard it from Daniel this morning, we’re in a transition here in this market in 2019 into 2020, where there’s been a lot of maturity and growth. But if we’re really going to scale and accelerate, what does that begin to look like? And I think that’s going to come into a lot … that picture is going to get a lot clearer this year as we really look into a decade of continued scalability for both solar and storage and the clean energy markets as a whole. Jon Powers: So what we’re going to explore today is how you help unlock that opportunity within both the storage market and the hybrid space. And to start off, I’m going to open up a with a question for Holly Christie, who’s the general counsel for Hecate Energy. Holly, you’ve developed deep experience developing and transacting in the market, both in your current role and in your previous life. First, can you talk about what Hecate does and then where do you focus geographically and what are you looking today at the market and deciding where to pursue either storage or hybrid products? Holly Christie: Sure. So thanks for that lovely introduction. I’m with Hecate Energy. We are a developer of solar and storage assets. We have about a gig of solar assets out there so far and a couple of hundred megawatts of storage in the pipeline, which has a lot of fun. I’m the general counsel, so I am the version of triple A for the company. So whatever problem there is, whatever tires fly off, I address those. And the question was where we’re- Jon Powers: First of all, what are you guys looking at geographically market wise? What makes an interesting market for you guys to get into? And are there specific areas that help you decide where to pursue storage and hybrid projects? Holly Christie: Sure. So right now we’re doing a whole lot of work domestically and we have some international projects as well as storage domestically. There’s a lot of interest in the CaISO and air caught markets, but I think those are always very, very saturated, very excited markets that move ahead a lot faster than others. Eastern seaboard is also seeing a lot of changes specifically in the way the New York ISO is looking to do their permitting process. So that might bring in a lot more interesting development. But so far we’re hitting everything all the time. So wherever there’s interest, wherever there’s an RFP, we’ll take it. And it’s now becoming I think standard for everybody across the board, if we’re developing a solar project, then we also tack on all the storage options as well. Jon Powers: And how is that sort of handled internally? If you guys are making decisions along the way and it’s just here we can tap this in now or is it a strategic decision that hey, try to load on as much storage as we can get into these deals today. Holly Christie: I think we’re anticipating what will be market demand in the future. So it’s just kind of like packing a nice pair of pumps when you’re packing a dress. It just makes sense. It makes sense now and it makes sense later when you will need that to match the nice dress. Jon Powers: That’s good. That’s a great analogy. I think Ken-Ichi he knows, the director of energy storage at Geronimo Energy. Ken-Ichi, unlike most players in the industry, you’ve actually been looking at storage for nearly a decade, which is really impressive. But first can you talk about Geronimo, what do you do and where do you do it? And then secondly, we flocked down this last decade in storage and what have you learned that you see carrying forward in 2020 and beyond? Ken-Ichi Hino: Yeah, great questions. Appreciate the opportunity here John. As far as Geronimo, we are a primarily utility scale player both wind and solar, pretty much nationwide. We’re headquartered out of Minneapolis and over our history we’ve grown from the upper Midwest throughout the country. And we are now a wholly owned subsidiary of national grid ventures. We are actively developing throughout the country, both wind, solar and storage in hybrid as well as in standalone formations. I think some of the themes that were touched on yesterday were themes that certainly resonates. As far as my background, I was lucky through really zero credit to myself to have had the opportunity to get involved in the PJM reg D markets in about 2012. And that’s, as I’m sure many of you are familiar, has been a pretty interesting path, a bunch of twists and turns to that. Ken-Ichi Hino: And I think I was thinking about this, there’s a couple of key lessons that really carry forwards, but one is really the robustness of your solution. Not only on the economic side and what things can change, regulatory issues are complex as we’ve all found out over the last couple of years and we are still finding out now. But also from the technical solution side. What does … do you really need 30 minutes or is an hour a much better idea? How much margin for error do you have? What’s the difference between a good project, a reasonable project and a total loss? Those margins can be pretty thin as some have seen. And actually I think the last thing to mention there is just lifecycle costs is a … or lifecycle and really the number of cycles that we can expect to get from a battery is a function of the energy intensity. Ken-Ichi Hino: I think the benefit that we’ve gotten is that we’ve gotten one, a lot of operating history. Two, better facilities for testing and reassuring developers, finance series, et cetera, what the potential is there. And I think lastly our, in terms of looking forward and where we are now, I mean, our modeling techniques, I’m sure Gary will speak to this, but we’re in a totally different place now than 2012. AWS was not a thing. And that makes a real big difference to understanding the robustness as well as the stochastic modeling techniques that we need to properly understand storage. Jon Powers: You hit on a couple of interesting things and one of them is sort of we’re getting certainty around things like the life cycle of these batteries. Are you seeing … we’re going to talk a lot about today about driving certainty across the market because it’s what it’s going to bring in better investment and really allow us to scale. What has to happen to continue to convince investors or to educate investors that we actually have real data now behind how these things are working? Ken-Ichi Hino: Yeah, I think that’s a great question. I mean the more that we get brand names out there and the more operating history that we have, obviously that’s going to make it easier. But at the same time, it’s not linear in many of these cases. And there is a major impact in terms of how you’re using it, the depth of discharge, et cetera. And so the more that we can get like for like comparisons out there and the more specificity that we have in terms of yes, this battery, not only this battery or this storage hardware solution, but this system overall thinking about the BMS, EMS sides of things has been operated with these sorts of characteristics, this level of depth to discharge on average, this average SOC over the course of however many years and it’s still got this much life left. All those things are things that we need to reassure and accelerate and reduce barriers. Jon Powers: Yeah, I mean there’s a common theme you probably hear from a lot of investors and even folks that I’ve run into here where it’s like we’re really interested in this market. We’re really interested in this market but we still haven’t done any deals yet. So we want to start to … including us, I mean CleanCapital what we do is we try to make investing simpler for institutional investors. We have a technology driven approach and we talk to a lot of folks who want to move into the storage space. But when you put a deal in front of them, they’re still on the verge of doing it and then moving, not doing it. The deal flow is just not certain enough yet to really hit scale. And with that I’m going to go to Gary for a second. I’m going to pass him the mic. Jon Powers: Gary is the founder and CEO of Ascend Analytics. And Gary as the storage market has continued to mature and we’ll talk more about, so the investment side of it for sure. But the management, the data analytics and sort of other components of this space are continuing to really grow and find ways to optimize the systems. First, talk for a second about why you founded Ascend Analytics, what you guys do and then what you’re seeing in the market for things like the type of premiums that can be earned on storage beyond just energy and ancillary services. And for the podcast folks, we have some slides that Gary’s going to be referencing that we will be having on the website. Gary Dorris: All right. I founded Ascend in 2002. We’re now about 50 people. So it’s grown a bit from my basement. We’re a decision analytic software and consulting company based in Boulder, Colorado. And we primarily serve as the analytic link between the physical and the financial, which is what storage really is. It’s an asset that physically firms power and when it’s used properly, can act as a mechanism for realizing additional returns and creating financially firm products. We work for banks and developers and utilities and valuing storage projects. We also operate assets, bidding them into the ISOs on an hourly basis. And we’re also involved in resource planning and portfolio management. In terms of storage, I wanted to go over just a little bit of the fundamentals, some of which I touched upon yesterday. But it’s important just to set this in your mind’s eye. Gary Dorris: And for those who are listening and not viewing these, I’ll just describe them. So if we look through time, just at a typical day in California, there’s two types of prices where storage is going to be operating principally and that’s the realtime energy price, which is shown in orange here. And there’s a green day ahead price. And you can see the Y-axis ranges from roughly $0 to $1,000 a megawatt hour. And things are pretty quiescent until early in the morning. And then the price of energy for the real time suddenly shoots up from about $10 a megawatt hour to $1,000, a megawatt hour just for five minutes, and it goes right back down. And then we go on to about 9:30 and price shoots up to about $300 a megawatt hour for 10 minutes and then back down. And we see a few more price spikes. Gary Dorris: Anything over a hundred, we consider a price spike. And as we go through time, we see three or four of these during the day. That’s what batteries do is they tackle these price spikes, no startup costs, no shutdown costs. They’re the insurance mechanism to respond to these realtime price spikes. You can see the day ahead prices in green and they’re almost flat at about $25 a megawatt hour throughout the day. Yes, there’s this idea of the doc, and it does manifest itself in terms of prices and certainly when the sun is at a Zenith angle around noon, prices tend to get a little bit lower in California today with all the solar and they do get higher when the sun sets. But that Delta maybe of $20 a megawatt hour is small in comparison to the real time. In the end, effectively all activity is settled against the realtime price. Suddenly this resource is very dynamic. Gary Dorris: It can help capture the variability in the real time prices, both positive and there are negative prices and the negative prices are growing. And so that’s the fit. In terms of how storage operates as a physical hedge, it collects an insurance premium above and beyond what it could garnish in just simply operating real time prices. And so I put an example here. And the way to think of it is this. If you’re a retailer and you have to serve load, there’s no way you want to be caught short and exposed to those real time price spikes. You don’t know how long they’re going to be, how many they’re going to be. You’re going to cover yourself at least in the day ahead market. And realistically, you’re going to cover yourself well in advance of that with monthly activities, maybe even six months or a couple of years out, insulating yourself against market moves. Gary Dorris: Storage just to operate the realtime prices might earn let’s say $25 a megawatt hour. Well, there’s a premium of day ahead above real time on average just because the demand at least for day ahead prices, but also the insurance, there’s risk. So let’s say that price is $27 a megawatt hour. Well, if you were to buy the monthly block, typically there’s a little premium for the monthly above the day ahead. That might be $28 a megawatt hour. And then if you were to use storage as a shape product meeting the exact dynamics of load, that would have a bigger premium, like $36 a megawatt hour. Gary Dorris: So these premiums where we see real time at the far left, less than day ahead, less than monthly, less than shaped, is a function of market dynamics. There’s imbalance between sellers and buyers and there’s definitely a little extra push for the buyers to cover themselves. And that helps create these premiums in addition to the inherent risk. And when you have something that’s inherently really volatile and you can’t effectively store it for long periods of time, like power, we have these massive price spikes just to address the imbalances that happen with the system. And as we have more and more renewables coming onto the system, there’s more forecast error and that uncertainty in supply leads to more volatility in prices and that’s where storage steps in. Jon Powers: Interesting. That’s great overview. I appreciate it. So with the idea again talking about accelerating the space in order to do accelerate the market, we not only need the developers out there doing the work they’re doing, the technology needs to come along, which it’s coming along. The way to manage and utilize the different financial tools that storage has and revenue opportunities, you also need an ecosystem to transact. And I want to talk about that ecosystem a little bit, Holly. You need lawyers that understand how this works so they can actually get the deals done. You need accountants that understand the different revenue models and how it’s going to tie into the deals themselves. And advisors that can help firms like ours and institutional investors get over the fear of the uncertainty of the space. As our resident lawyer on the panel, how do you see the ecosystem developing and becoming more advanced here in 2020 and beyond? Holly Christie: So I think one of the most difficult things with storage has been that it’s such an unusual product and it doesn’t work like other products. And you have this fruit platter of different kind of things that you can pick from as far as what you’re marketing and what you’re using the product for. So I think the ecosystem is coming online to really be able to take advantage and work through and get more familiarity in the marketplace of what those different kinds of products can do. So just like if you put one of those strange frogs in Australia and it eats everything and it doesn’t work out really well, it’s the same kind of thing where we have this concept of this is what storage is. It works like an energy product. Holly Christie: We’re going to contract it like an energy product and there’s so much more that can be done there with that. So I think as that ecosystem comes online, as you have folks that can support, as you have insurance products that can support various kind of contingencies with the product, we can get a lot more depth in the market and we can get a lot more saturation with regard to what the market’s looking for. Jon Powers: So the reason I asked that is because the soft costs of getting these deals continue to be significant, right? The amount of advisors and consultants and education you need for all the different players along the way, including the legal bills, which go up do ginormously on everything. Holly Christie: Right. I mean, everybody hates lawyers, right? Jon Powers: Yeah. We love lawyers, they just cost us a lot of freaking money. Have you seen that compressing? Have you seen those sort of soft costs compressing as people are getting more educated in the space? Holly Christie: I think I see it because I want to see it. Right. So one of the things I struggle with that’s directly a cause of this or because of this is kind of contract variety around certain products. So you are contracting for RA and you have maybe six different contracts that you can use for that. And none of them are the perfect fit really. None of them are developed for the RA market specifically. So you have a lot of variants, you have a lot of like chubbiness around the sides of contracts. You have a lot of … it’s like trying to find the perfect Uber. You want a Maserati but there like a mini bus shows up and then like a Ford Taurus shows up. Holly Christie: And in talking with counterparties, especially uneducated counterparties or less educated counterparties, when they show up with a minibus and you’re like, “That’s a lot of seats, right? We don’t need that many seats.” Or the tourists, like this is not comfortable. It’s not cute. We’re not going to have a good time in this car. We don’t have to contract with an EEI for an RA product. That’s just causing us all pain. We’re already depressed and sad people. So- Jon Powers: Looks like blinds are down here. Holly Christie: So let’s find and work together towards something that gets us toward what we’re looking for without all the extra seats and the uncomfortable ride. So that education process is- Jon Powers: Yeah. I mean there’s familiarity with like PPAs and solar. And I think there was this expectation in the market that that same familiarity will just get people comfortable with storage, but it’s not the same thing. It’s just those lessons are being learned heavily. Holly Christie: No. It’s apples and oranges. Yeah. Jon Powers: Awesome. Yeah, please. Ken-Ichi Hino: So I feel like it’s all of these uncertainties that are out there that we’re getting better at and we are certainly progressing towards it. But between, for the developer side, we’re bringing together not only the solution and the financing, but also the utility constructs and contract as well. And an RTO is the regulatory structure. So this matter of matching what we are providing and defining it better is if it’s a Maserati or a scooter, right. And from the utility side, being able to spec that and not say, “Well, 90% of the time I want it to be Maserati, but 10% I want to be a scooter. Right? Or what’s it going to cost me for it to have the optionality of being a scooter 10% of the time?” And then going back to the solution provider side, figuring out what that costs and getting through those cycles and understanding what’s a reasonable ask, what’s not. We’re getting there slowly. But we can all do some parts of that to bring those soft costs down. And so I think it’s a bunch of little steps from everybody involved to get there. Jon Powers: Right. So could you hold the mic, because my next question is for you, and we talked about this a little earlier this morning. And I think one of the changes in the market that’s different today than maybe solar was 10 years ago is you now have a much more sophisticated and demand driven space coming out of corporate America. Right? I think just to put some numbers out there, more than 200 companies have committed to 100% renewable energy, including behemoths like Apple, Walmart, Facebook, and Google. According to Bloomberg new energy finance, corporate PPA has went up 44% in 2019 totally 19.5 gigawatts. So that CNI market, the DG market, they’re not all DG. So they’re doing virtual PPAs, they’re doing a variety of different approaches. It’s a sophisticated marketplace now that has a demand for storage. How is that affecting your guys’ ability to sort of develop and is it creating opportunity? Ken-Ichi Hino: Yeah, I think it’s a great thing and it is creating a lot of opportunity. And the market as you said, is only growing. We’re going from the truly massive players and that’s kind of the structures that we’re developing there are enabling smaller players to come in and chip in their demand as well. So we’ve seen that as a major asset. I think the other thing that, one of the other aspects is we’ve seen some of those same buyers get more involved in the RTOs, have more of a voice, get involved in regulatory proceedings. Things like green sleeve contracts in non RTO markets that enable them to access wind and solar much easier. Those are huge benefits to us. I think on the storage side of things, we’re getting there and one of the more interesting and leading edge factors that we’re seeing is this push towards a zero gross carbon rather than zero net and matching demand 24/7. Ken-Ichi Hino: That is I think a leading edge aspect that a few of the CNIs are looking at. And as we think through that, we’re going to get to the best way to do that. Right? Is it paired with your generation? Is it paired on say how much resiliency do you want? You’re getting to understand the total impact of a corporate’s operations and how to leverage storage best to optimize for whatever the objectives are. We’re getting there. We’re seeing that. But we’re in early days. Jon Powers: Yeah. And they’ve become an interesting … they’re laying the groundwork in interesting ways in certain places. Like Vermont’s a great or Vermont … Virginia is a great example of indigenous pace pass, really amazing and progressive clean energy policies, which is amazing. I lived in Virginia for a long time. Dominion hated clean energy as much as they talked about how much they loved it. Is it possible to gets stuff done? Microsoft and Google went in for two years and pounded them because they said, “We’re not going to bring our data centers here unless you can find a way to change the way you approach things.” And then we got to a place where they’ve opened up the market for a lot of other people. So I think that continue to work from them is going to be important for us in the market to support. Jon Powers: And the demand they’re drawing is great. Sometimes their expectations are pretty intense. But I think we can try to leverage that demand as much as possible. Gary, I want to hand it back to you. After the next round of questions, I’m going to open it up to the audience. So please, if you’ve got questions, think about them and write them down. But Gary, how do you … we talked earlier about how PPAs were such a driving force in solar and for renewable plus storage, it’s not that simple. How do you see renewable and storage projects utilizing things like hedges to find the highest level of revenue for the owners? Gary Dorris: Yeah, we’re seeing renewables and storage kind of fall in the footsteps of thermal assets. You can’t always get a PPA when you have a great project. There’s a window of opportunity with investment tax credits. And so what do you do and how can you take advantage of over the counter hedge instruments like we’ve been doing with thermo and put the pieces together to financially firm delivery of energy? And there are two key ways that we look at taking advantage of delivery. One is taking advantage of the ITC and that would be what we call in an illustrating here, is in a closed system. So this is where the battery charges or is charged by solar. The other system is open where the battery is going to operate independently of the solar system and its grid charging. With the closed system, you’re able to get the 30% ITC, because of the grid charging. Gary Dorris: Well, let’s go ahead and look at a solar plus storage for four hour system hedged. And we’ll look at the premiums I talked about in my earlier question response. What we can see here, and for those who are on the podcast, I’ll explain it to you. We’ve taken a solar system combined with a four hour battery, and this is for a closed, that means ITC compliant, 30% tax credit towards the battery. And this is initially unhedged as shown in red. And then we have green showing hedged. And what happens here is we have an expected commercial gross margin of NPV of $243 million. So that’s the expected, that’s the average NPV return. If we look at the at risk component, the difference between the mean and the fifth percentile, we look at this unhedged solar plus battery, it’s 87 and a half million dollars. Gary Dorris: So it’s a pretty big risk there. If your expected is 250, you have 87 and a half million at risk. Well let’s take a hedge. It’s a simple block on peak, off peak. In this case, it’ll be on peak, solar plus storage asset. Exact same one, exact same expected return of $242 million. We layer on the hedge. The gross margin at risk drops from 87 and half million to 24 and a half million. So roughly a third of the amount of risk, simple over the counter hedge instruments, readily available to any broker in the market. That’s great. You’ve taken a lot of almost, you’ve reduced the risk to something that’s quite manageable. You’ve firmed up returns. In addition, you’re able to earn premiums above and beyond what I’m showing here, because you’re able to still operate the asset to the day ahead realtime prices and collect other forms of insurance premiums above and beyond spot. Gary Dorris: But in terms of financing, you can go out at least three years with these hedge instruments and bring in maybe a mini perm, certainly have a role in the hedge forward strategy and look for other ways of bringing in institutional equity and debt on projects. If we look at the same system closed versus open, there’s a little more risk in closed versus open. So open being grid charging, you don’t qualify for the ITC. But you do have the ability to charge when you want, when it’s economically opportune. And in doing so, the risks come down maybe an extra 10%, 10% per year versus 30% upfront. Most people take it upfront, but there are some projects and sites that are more volatile. We’ll see 25% difference. Gary Dorris: So being open, not taking advantage of the ITC may be beneficial. And operationally what we’ll see is when you have grid charging, you’re able to move the asset up and down a lot more, take advantage of ancillary services generally a lot more. So it’s a little less risk in that regard. It’s a trade off that needs to be evaluated. But using renewables plus storage as a basis to create financially firm products is the future. And that’s how these projects are going to get developed. Jon Powers: So how often are you seeing this hedge being worked into the financial models of systems that you’re seeing? Gary Dorris: So hedging is certainly relatively new to renewables. So if you have a merchant generation, you have no choice but to be in looking at ways of correctly exploiting the value that you’re producing. And doing hedging without having the backup of a battery, even just a short duration, one hour or a two hour battery, that’s too risky. I mean, you just can’t do it. You can do a little bit with solar. It’s dependability, but realistically, it’s a big risk to undertake even just doing day ahead versus real time is hard to do. You have to have very good weather forecast or in forecast of your production. You can do a little bit of hedging perhaps, but not enough to really move the needle and effectively mitigate risks. So it’s the combination of renewables plus storage that enables developers to create a financially firm product and that’s where they’ll start earning premiums above and beyond spot. Jon Powers: Right, right. So let me open it up to the audience to see if there’s any questions. If there are, please raise your hand. We’ll bring a mic around. Lee Bailey: Hi Lee Bailey here. So when you go out to the investment community seeking equity investment, what kind of returns do you tell the investor they’re going to get if they invest in whether it’s Ascend or one of the other companies doing this kind of sophisticated data analysis with storage? Gary Dorris: Well, returns are really project specific and depends on the nature of the project and how the pieces are put together. Our job is to forecast the revenues. Certainly what we’re seeing is even on a merchant basis, financial institutions are getting comfortable with loaning to merchant renewables plus storage in particular, but even just merchant projects, storage alone in renewables. It’s definitely evolving much closer to the comfort level that financial institutions and institutional equity has with thermal assets and their participation has been critical for the development of thermal. We’re seeing this following the same footsteps for renewables. This is great. It’s something that’s welcome and realistically, not everybody can get a PPA. Gary Dorris: The best you can do realistically today is at least at any scale is perhaps a capacity contract. And capacity is definitely something that’s coveted and really liked by financial institutions. In Texas, there is no capacity market, but it’s a very active over the counter hedge market. And so there’s other mechanisms of securing revenue streams to these projects. So you combine the inherent production at zero cost variable for renewables with some flexibility of storage and we’re seeing new structures and forms that are supporting future revenues. I think in terms of returns, maybe I’ll turn to my colleagues to my right here. Ken-Ichi Hino: Sure. I’ll take a shot at it. In terms of project returns as Gary said, everything is project specific. And really it depends on when we think about the risks that we’re taking. For example, a solar plus storage project with a 15, 20 year utility contract with a credit worthy entity. That’s a pretty fair or a pretty low risk project which shouldn’t be priced to that much of a premium. There’s a spectrum as far as the level of uncertainty and the sources of uncertainty that you’re taking on, the time to capital, et cetera. And yeah, depending on the views that you take, I think those returns can get pretty high in certain situations as you look across the spectrum of potential storage projects. Speaker 6: Hi, how do you insulate your asset against unanticipated long term outages or things like fires and things like that? Ken-Ichi Hino: Yeah, I think there’s a … Well, I’ll take the first shot before turning it over to the lawyer and tire patcher here. From my perspective, I think it starts up front in terms of specking what exactly you need for the revenues that you’re looking for and then making sure that any warranties, operating conditions, et cetera, are fully matched. I mean what you’re getting from your supplier base. So making sure that you have both the flexibility to do it and the financial protections that you need to do what you think you need to do to make your money is step one. And you mentioned fires. I think thermal protection is pretty top of mind for many, if not most. Ken-Ichi Hino: And I think we are getting there in terms of the needs and the permitting requirements across the board. I think a better … well let me see. I think system reliability as we touched on with John earlier is really the key there. And getting more proven operating history, more proven safe operating history across entire solutions, not just particular components is one thing that we’re really looking for and that we think can make a big difference in terms of reliability and safety. Holly Christie: So it’s very odd to talk in this thing like this. But so I would say, how do you kind of hedge against those issues, those risks? Carefully. So a lot of times when developers who I love, I love developers. They’re so eager, they’re so zealous, but they’re also eager and super zealous to sign those contracts really fast. And the cost benefit analysis of that is like how long do you want to spend negotiating those smaller terms that may not be important versus how worried or risk adverse are you to those potentially low probability risks that that may happen? So for example, the Coronavirus for the last month I’ve been preaching that we slap in a more robust force majeure provision just in everything that has to do with product acquisition, EPC, any of the kind of M&A docs. Holly Christie: And then within the last week, I’ve looked at that and said, “Okay, we need to pull this back out of the force majeure provision because in order for it to be a force majeure provision, it has to be reasonably unforeseeable. And at this point it’s not unforeseeable. So now we’re tacking it in as its own really fun doomsday clause. Yeah. So we’re seeing that be a very important part of the negotiations as well. And I think if you have a product and you take just a little while and you sit down and you go into the dark place of what are all the worst, terrible things that could happen and say, which of these make me actually very uncomfortable, which are we kind of risk tolerant to? You can usually contract around those if you’re very careful with that. Speaker 6: So [inaudible 00:35:11] doomsday clause. Holly Christie: Doomsday clause. Ooh, isn’t that so exciting? So with regard to the doomsday clause, I’ve seen a couple out there. I’ve put together one. It’s very sparkly. You would love it. But it just talks about the potential for delay and what we’re trying to hedge against there is of course not being able to get financed. Finance guys love security and what’s not secure is knowing where your stuff is going to come from and it’s going to come. So we try to take the risk out of that by saying, these are the parameters of how wrong it could go and where we could still kind of keep the project on the rails. And this is what would happen in these kinds of very, very worst case scenarios, 120 days, 160 days, however long you can kind of stretch that out should the panels or the battery cells or whatever you’re looking for, not be able to get here from wherever they’re having problems. Holly Christie: Things to be aware of, I’ve seen doomsday clauses that call out specifically the COVID-19 virus, which is hunky dory until the COVID-19 virus morphs into something else and then you’re not covered at all in your doomsday clause. So if you’re drafting these first, great work. Second, be vague, because the end of the world could happen in a lot of fun different ways. So you might want to cover all of those. So you say delays in your subcontractor, your shipping, your procurement. That can be … it’s like a force majeure language that can be tied back to the global pandemic, which may or may not stem from COVID-19. Jon Powers: Keep the questions coming if you have them. But I sort of want to go … Going back to, you talked about this being the investor side, they do want certainty, right? And the more you can sort of de-risk this and bring certainty, the better. But we’re still … that transition Daniel talked about this morning from 2019 to 2020, there’s still a lot of uncertainty. We’re seeing major players in the market shifting their business cases for instance, between STEM and AMS and others. They’ll go from being full developers to just being SaaS systems. You’re seeing the technologies change, you’re seeing the policies change and continue to morph. Massachusetts got maybe a clean peak standard coming out which is very exciting. It can provide a lot of opportunity. Jon Powers: But there’s still just a lot of uncertainty around it. This is sort of an open to each of you and I’ll start off with with Ken-Ichi and pass it down, but what are the two to three developments that are necessary in the next year or two to really accelerate that certainty in the market and help us scale and accelerate the acceptance of solar or solar plus storage? Ken-Ichi Hino: Two to three, huh? Well, not seven, but yeah. In my view from the market side and coming at it from more of the economics and revenue streams, I think we are seeing the RTOs build on fargate 41, with some questions about solar plus storage. And I do believe that there’s, in terms of the amount of megawatts deployed, solar plus storage will probably exceed standalone. And I think clarity [crosstalk 00:38:19] yes. On the utility scale side I should say. Yeah. But, think we’re seeing task forces developing right now. Some are in progress that are going to establish all these rules for how solar plus storage projects are allowed to operate. How you’re accredited for capacity, what you are required to do in terms of your bidding and the sorts of things that are filling in around fargate 41. Ken-Ichi Hino: But that I think is a major source of removal of uncertainty that will certainly help. And closely related to that I think is a lot of the work being done on capacity accreditation for storage. I had some conversations about this yesterday and today, but storage is many things. It can be almost anything. And what’s it worth for different applications? That’s a tough question. And we’ve got some questions or some answers to it, but are we looking at a 20 year project and if so, do we believe that for 20 years? I don’t think we’re quite there yet. So I think getting those two things out and having a little bit more certainty for investors would really help. Jon Powers: Great. Holly. Holly Christie: Yeah. Firstly, if you were like a fairy and you were like, “What would you really like?” Yeah, I’d say consistency across the RTOs would be awesome. What is capacity? Gosh, I’d really like to know that forever, but that’s not something I can do a lot of fiddling with. So if you have those magic powers, let’s talk later. And if you don’t, I would probably look back to my most important things being contract consistency. I find financeability or finance guys like container a lot. So Yogi bear always after the picnic basket, right? We never really talked about what was in the picnic basket. He was just always about the picnic basket. Finance guys are the same or similar where as long as it’s in a picnic basket, they’re like, “Cool, we’ll give you money for that.” Holly Christie: So what I try to create the picnic basket out of is a longterm contract of some kind of duration that looks like a PPA looks, that looks familiar, that you have these, here’s a product and here’s the income that you’re getting and here’s the long term and it’s okay. And then to back that up with like back to back guarantees and longterm warranties and things like that. And if you don’t have that from your supplier or your subcontractors, there’s a lot of really cool insurance products that you can get to kind of bolster those up and create the look of a picnic basket. Jon Powers: Right. I love it. So we need more picnic baskets. Holly Christie: More picnic baskets. Jon Powers: Gary. Gary Dorris: All right, I’m going to flip the question backwards here because uncertainty is what inherently drives the value of storage. I mean storage is the ultimate physical hedge in terms of responsiveness to create firm financial product. It can tackle the realtime price spikes better than any other type of resource. So what we need is more uncertainty in market price dynamics. We need clear price signals that reflect both forecast error, congestion and scarcity. And when those price signals are clear, storage can operate to them. They’ll be able to earn premiums for that flexibility. And I think in creating financially firm products as well, and that’s what will drive a lot of value. Gary Dorris: So it’s uncertainty is what we need for storage, renewables plus storage to extract value. In terms of I think moving forward from a policy perspective, perhaps the subsidies that have been out there and even the ITC, that’s very ambiguous as to its future. We have state programs that are coming in and subsidizing development of storage in Massachusetts and New York in particular versus regional programs and carbon. And carbon I think if there was a more uniform approach, I think that’d be a more efficient mechanism of incentivizing storage and having some more certainty there would help. And obviously in the investment tax side, having the certainty wouldn’t help. Jon Powers: I mean, we hear a lot about the different policy implications, whether it be at the state level. I think all of us in the industry have to step back and say, “Look, what’s going to happen this year and that what’s going to happen in 2021 and beyond? Are things going to change in Washington? Is it going to continue to be a state level fight?” And I think one of my challenges to the audience, both in the room and on the podcast is we have to be the voices at the table pushing for that change. So you have to actively be part of the conversations. If you’re in New York, I need you to go to Albany. If you’re in Vermont or in Virginia, you go to Richmond. You need to be part of that dialogue. Jon Powers: One of the things we did at CleanCapital is we actually mapped out all of our systems and by zip code and who the congressional member was, and we were surprised at how many fell into … first of all, we had an intern do it, so it doesn’t cost anything. It was really great. I challenge you all to do it. Find out who the members were. There were a lot more Republican members than we expected. And we actually wrote them letters and just said, hey, we’ve got solar systems in your district. The ITC is a really important thing for us. It’s really important for jobs in your district. But we all have to be active roles in that policy push if we’re going to see this certainty. Jon Powers: So I think my challenge to each of you is what’s going to happen this year to start to lay the market groundwork, but we’re going to see some dramatic changes possibly in policy in 2021 and beyond. You have to be active participants. It’s hard to do, but take a look at partners like the Energy Storage Association at Solar Energy Industry Association and others and be part of that. It’s a great way to engage and really lay the groundwork for the market that we all are looking for. So I guess my … just the close out, is there any sort of final thoughts or comments about how we continue to really accelerate things going forward? I think it’s been a really interesting conversation. Gary Dorris: Anything to help accelerate? Jon Powers: The continued acceleration. Yeah. Just sort of the- Gary Dorris: Well I think inherently the amount of renewables that are in the system, there’s going to be continued acceleration of pairing renewables and storage. Renewables are the critical driver for variability in real time prices and creating some even day ahead prices. Some movements. And it’s set up down movement, that volatility in prices that’s the central engine of value that storage provides. And without that volatility, storage isn’t worth much. So as long as renewables continue to progress and we have market mechanisms working, developing price signals that are consistent and volatile, we’ll have increased value for storage and we’ll need more storage. And this is an inherent dynamic as we go higher and higher renewables. Jon Powers: That’s great. 40% of Americans live in a state right now that has 100% renewable energy bill. Holly Christie: Hey, that’s awesome. Jon Powers: Yeah. Which is more and more demand’s going to be coming up. Holly Christie: Yeah, no, I’m super, super excited about storage. I mean it’s, it’s different. It works different. It looks different. It’s something new. The technology is very exciting, very cutting edge and it requires people to be a lot more flexible when they think of how it could function and how it could look in the marketplace. So it’s for me, exciting because it’s the wild West. It both contracts and it breaks in ways that other things don’t break. So you get to go off the reservation and really create the things that are going to be the industry standard for this market going into the future. So that’s really cool. Holly Christie: But it also requires a lot of folks to be very creative, to be a little bit more flexible and to sit down and have conversations when they’re looking at contracting things or when they’re looking at kind of the longterm resolutions of issues around storage. Probably more so than any other renewable technology has so far. So if I could have one kind of go out there and do this, I would say keep having those conversations. Stuff like this is super important and keep an open mind because you might invent a whole new way to do something. Jon Powers: Yeah. New picnic basket. Ken-Ichi Hino: For me I’m going to go back to what Gary said and echo the renewables push. I think there’s a great virtuous cycle between renewables and storage in terms of creating a need and also storage enabling further penetration of renewables. That is not meant to just be limited to batteries but all types of storage and new and emerging technologies as well as those that are old and well-proven. So I think that’s one big thing that will help accelerate this because I think the reality is while we’ve got great pushes that are happening in terms of the mandates, potential tax policy, et cetera, it’s really the polls that are going to accelerate the speed of deployment and the speed with which we get certainty on many of these things that we want, more picnic baskets faster and all that. So I think renewables and the increasing deployment of renewables are the most logical and most reliable path to getting there. Jon Powers: Excellent. Well, thank you to a phenomenal panel for your insights today. And thank you to Energy Storage USA for hosting us here. As always, you can get more of our Experts Only Podcast episodes at cleancapital.com. If you are developers in the audience and are interested in transacting, we would love to talk to you afterwards. And as always for the audience to the podcast, we look forward to continuing the conversation. Thank you. Thanks for listening in today’s conversation. Find more episodes on cleancapital.com iTunes or wherever you get your podcasts. If you like what you hear, be sure to subscribe and leave us a five star review. We look forward to continuing our conversation on energy, innovation and finance with you.