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Clean Energy For All
The Energy Storage Capital Challenge

Aligning Capital
For Innovative Energy
Storage Projects
In New York State

Aligning Capital For
Innovative Energy Storage
Projects In New York State

Aligning Capital For
Innovative Energy Storage
Projects In New York State
Aligning Capital For Innovative Energy Storage Projects In New York State

Executive Summary

Executive Summary

Executive Summary

The shift to a resilient, clean grid is an opportunity to launch a new era of economic growth and transformation. The Decade of Deployments. Ten years in which we can build a future that is not only more abundant and energy-secure, but healthier and safer for our families, communities, and planet.

Developing energy storage—the batteries, microgrids, and other technologies that allow us to manage energy fluctuations, access backup power, and produce clean energy when we need it, where we need it—is key to realizing this future.

The good news is that the energy storage ecosystem is already teeming with innovative, ready-to-scale solutions. Solutions that can leverage untapped siting opportunities and drive new customer demand. Solutions that are more nimble and faster to deploy than their larger, traditional counterparts. Solutions poised to chart novel permitting pathways and offer capital providers promising returns.

But these innovative energy storage projects, the solutions we need most, are getting stuck in development. Almost all development-stage energy infrastructure projects face a “valley of death,” where costs for essential activities—like feasibility studies, permitting, and interconnection—quickly add up, and capital to fund those activities is lacking. As a result, many promising projects fail to make it through development and into our communities.

This dynamic is even more acute for innovative energy storage projects. Energy storage projects inherently require substantial upfront investments and have long development timelines before they begin generating revenue. In addition, capital markets are not built for innovative projects, and perceived risks only drive up the cost of capital offered to projects. A critical obstacle slowing the deployment of these projects is this scarcity of patient, development-stage financing.

That’s why we developed the Energy Storage Capital Challenge, a six-month program dedicated to finding the right ways to stack capital to make financing innovative energy storage projects easier. We selected six live projects with financing gaps emblematic of industry challenges and workshopped them with capital providers and industry actors to pinpoint replicable solutions.

We started in New York State, which has positioned itself as a national leader in the clean energy revolution by driving forward bold energy policies and initiatives, including progressive targets for energy storage deployment and the establishment of a national hub to test and manufacture next-gen batteries.

Ultimately, we witnessed how collaboration and a more diverse capital stack can enable the development of first-of-many projects. Projects that will reshape the energy storage landscape and catalyze market-wide impact. Capital providers that shy away from innovation risk missing out on this opportunity and its promising returns.

This report dives into the fourteen actionable solutions we’ve uncovered to unlock financing, from credit enhancements, insurance and revenue guarantees to site leasing, interconnection debt products and bridge loans. We now need capital providers to step up and embrace creative approaches to bring this future to life.

Our partners in the Energy Storage Capital Challenge
Companies
Capital Partners
Industry Partners
Funding Partners

The Energy Storage
Capital Challenge

The Energy Storage Capital Challenge

The Energy Storage Capital Challenge

At The Clean Fight, we don’t shy away from tackling the thorniest obstacles slowing deployment.

Too many innovative energy storage projects are getting stuck in development because they lack access to the patient, affordable capital needed to scale. We created the Energy Storage Capital Challenge to tackle this problem head-on.


We began by identifying the key financing challenges slowing the progress of innovative energy storage projects in New York. Then, through a statewide search, we selected six development-stage projects that faced financing gaps emblematic of these larger industry challenges.

The projects incorporate novel use cases, technologies, and business models with the potential to chart a new frontier for storage deployment in New York. From mobile storage (Power Edison and NineDot Energy) to stationary storage systems that open up new sites for development (Orenda Power and Convergent Energy and Power), to novel storage for transit (Sprocket Power and Beacon Power).

Over the course of six months, we workshopped the projects’ financing strategies in real time, bringing together the project developers and 14 capital partners from across the stack, including philanthropies, green banks, infrastructure, and venture investors. We also brought in utilities, government agencies, and industry organizations that play key roles in the development process—such as NY-BEST, the State’s leading energy storage experts—to tap into their knowledge, provide technical assistance, and help each project advance more effectively. Finally, we committed $200,000 in grant capital to help test novel financing solutions uncovered by projects and partners.

Our findings are a testament to the power of deep, facilitated collaboration as an accelerant for market change.

Six months. Intensive conversations with capital and industry leaders. Actionable solutions.
First-of-many deployments.

The Opportunity

A Thriving Market
In New York

A Thriving Market In New York

A Thriving Market In New York

This past summer, New York hit a pivotal inflection point for energy storage growth—the State approved the long-awaited New York Energy Storage Roadmap 2.0. The Roadmap builds on a foundation of ambitious, legally binding climate goals enabled by the Climate Leadership and Community Protection Act, and sets a framework for the State to achieve a nation-leading 6 GW of energy storage by 2030. The Roadmap also solidifies the financial case for energy storage in New York, authorizing an additional $1.5–2.2 billion in ratepayer-funded incentives to speed the State towards its 6 GW goal.

The approval of the Roadmap has injected momentum into an industry that is backed by a robust ecosystem of technical assistance providers, permitting authorities, and utilities ready to support energy storage growth within the State. At the forefront is the New York State Energy Research and Development Authority (NYSERDA), which provides long-term market planning, programs, and incentives to speed deployments in Upstate and Downstate New York.

New York is emerging as a national hub for battery innovation and manufacturing. $113 million in funding from the U.S. Economic Development Administration and from New York State has been invested to set up the New Energy New York (NENY) coalition, which is fueling Upstate New York’s Southern Tier as a hub for manufacturing, testing, workforce development, and innovation. The NENY coalition aims to contribute to the growing labor pool—200,000 jobs —needed to support the U.S. battery supply chain by 2030 and position New York as a national center in energy storage manufacturing. Binghamton University anchors these efforts with Nobel Prize-winning expertise in lithium-ion battery technology and additional funding from the U.S. National Science Foundation to advance next-gen batteries.

Lending further stability are nation-leading energy storage experts New York Battery and Energy Storage Consortium (NY-BEST), who engage the robust ecosystem of technical assistance providers, permitting authorities, and utilities to provide critical support to developers navigating the State’s energy storage landscape.

“The approval of The Roadmap has injected momentum into an industry backed by a robust ecosystem of actors ready to support its growth.”

Vast, Untapped Potential

To fully transition to a zero-emission grid, New York will need at least 12 GW of energy storage by 2040. While significant strides have been made in deploying utility-scale projects, we’ve only just begun to realize the potential for small, innovative projects that have the versatility to meet the broad spectrum of New York’s grid needs. Small, innovative projects have the capacity to provide critical grid functionality in dense, urban areas. Small projects are already being deployed to enhance building resilience, replace peaker power plants, enable EV charging, and provide off-grid power in remote areas.

These projects demonstrate ample opportunity for scalability. They stand to open new markets and deliver promising returns for early investors. Those who fail to position themselves in early projects as these developers scale risk being locked out of accessing substantial portfolios in the future.

The Problem:

Innovative
Energy Storage Projects
are Getting Stuck
in the “Valley of Death”

Innovative Energy Storage Projects
are Getting Stuck in the “Valley of Death”

Innovative Energy Storage Projects
are Getting Stuck in the “Valley of Death”

Despite their clear market potential–and their potential to boost the resilience of our communities–innovative energy storage projects are getting stuck in development. Almost all development-stage energy projects face a “valley of death,” where costs for essential activities—feasibility studies, permitting, and interconnection—quickly add up, and capital to fund those activities is often lacking. This dynamic is exacerbated for innovative energy storage projects, which are capital-intensive and require complex revenue streams that make it difficult to secure patient capital.

For years, regulators, utilities, developers, and public agencies have been collaborating on how to move clean energy projects through the “valley of death” by addressing the policy and technical challenges to storage deployment in New York State.

The Energy Storage Capital Challenge builds on this work by bringing in the creativity and expertise of capital markets to focus in on the financing challenges faced by energy storage projects. Some of the capital challenges raised in our convenings are common across clean energy projects and have been discussed in detail by leaders in climate finance.

Other challenges are specific to or exacerbated by energy storage’s unique characteristics. These challenges fall into two categories: 1) Traditional capital markets are not incentivized to support innovative energy storage projects due to high transaction costs and perceived risks, which drives up the cost of capital for developers, and 2) Development uncertainty creates further investment risk, limiting debt access and forcing developers to use expensive equity that stymies growth.

Challenges
1. Traditional Capital Markets Aren’t Built For Innovative Projects
2. The Uncertainty of the Development Process Creates Investment Risk
The Valley of Death

Below is a diagram of the “valley of death”—the point in project development where even the most promising projects, those with proven technologies and sites selected, get stuck moving from feasibility to construction, due to a lack of fit-for-purpose capital.

Chart comparing Risk and Cost with The Valley of Death representing the valley shared by both.

Breaking Through
the Valley of Death

Challenge 1:

Traditional Capital
Markets Aren’t Built
For Innovative Projects

Traditional Capital Markets
Aren’t Built For Innovative Projects

Traditional Capital Markets
Aren’t Built For Innovative Projects

Innovative energy storage projects fall prey to the "missing middle" of climate finance. The current investment models of traditional market actors don’t meet the needs of these projects and so they struggle to secure the capital to move from feasibility to construction. High transaction costs and high perceived project risk are critical deterrents to providing the affordable, patient capital that’s needed. During the Energy Storage Capital Challenge, leading thinkers like S2G Ventures and Trellis Climate highlighted the need for growth equity that can deploy small check sizes and offer fit-for-purpose capital for innovative energy storage projects.

HIGH TRANSACTION COSTS

Banks are often reluctant to fund these smaller deals or process associated tax credits. Due diligence costs are generally fixed across deals, making larger projects more attractive. Despite a compelling investment opportunity, investors and financiers must dedicate significant time and resources to underwriting each deal before presenting it to the investment committee, which means diverting attention from larger and more predictable opportunities. Evaluating breakthrough technologies, business models, revenue streams, and permitting pathways further complicates the process.

In addition, short-term, lower-cost financing needs, such as funding equipment deposits before product delivery, add to the burden of due diligence. Smaller projects also tend to grow unpredictably as customers gradually add capacity or infrastructure. This dynamism can trigger a need for greater diligence or re-negotiation of contracts and may be seen as too uncertain for investors who prefer the stability of more established projects.

PERCEIVED PROJECT RISK DRIVES UP
COST OF CAPITAL


As a nascent industry, energy storage revenue streams are not as straightforward as those for wind or solar, often involving multiple streams that are tied to specific project performance requirements. Additional use case or technology innovation on top of an already unfamiliar business model increases the perception of risk for capital providers. Financiers may also be wary about the long-term sustainability of the new companies behind innovative projects. As a result of this perceived risk, small, innovative projects struggle to secure non-dilutive, inexpensive capital. This creates a "cold start" problem, forcing developers with innovative projects to rely on expensive equity and debt that limit growth and the ability to scale.

Actionable Solutions to Incentivize Capital Markets

Capital and financial service providers at the forefront of climate finance innovation are repurposing traditional tools, exploring novel approaches to derisking projects, and collaborating with new players such as philanthropy and nonprofits. Our conversations through the Energy Storage Capital Challenge uncovered the following emerging, actionable solutions to incentivize capital markets.

Corporate & Project-Level Credit Enhancement
×
Corporate & Project-Level Credit Enhancement

What is it?

A form of catalytic capital that strengthens a developer’s balance sheet credit by providing additional cash on hand to reduce lender risk, and secure affordable debt without diluting developer corporate equity.

How does it work?
Corporate-level – Strengthens a company’s financial profile, improving their ability to attract capital at favorable terms.
Project-level – Acts as a credit enhancement by covering specific costs or expertise needed to de-risk a novel project while protecting the developer’s broader balance sheet.

Who could provide it?

Philanthropy, mission-driven investors, and government entities supporting higher-risk positions to unlock market rate capital.

Who does provide it?

Trellis Capital pools philanthropic capital to help de-risk projects for market-rate lenders and accelerate climate infrastructure deployment.

Creditworthy Corporate Guarantors
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Creditworthy Corporate Guarantors

What is it?

For projects investors deem risky, developers can secure corporate partners to act as portfolio guarantors. Particularly useful when the corporate is an offtaker, site host, or equipment supplier invested in the portfolio’s success.

How does it work?

Corporate guarantors reduce the perceived project portfolio risk for investors, allowing individual projects to secure lower-cost debt. Developers can also bundle projects into a Special Purpose Entity (SPE) to streamline financing, simplify transaction structures, and lower transaction costs.

Who could provide it?

Corporate offtakers, energy storage manufacturers, and energy service companies.

Who does provide it?

A NY building management company successfully bundled 15 rooftop solar sites into an SPE, thereby guaranteeing the entity's debt to secure financing. 

General Project
Insurance
×
General Project Insurance

What is it?

Insurance provides guarantees for risky aspects of project development, including property, fire safety, market price fluctuations, tax credit monetization, and asset performance.

How does it work?

Insurers boost the financial viability of energy storage projects by offering risk-mitigating products that protect cash flows and collateral and attract market-rate capital to projects.

Who could provide it?

Insurers

Who does provide it?

Among others, kWh Analytics provides property insurance for energy storage systems and tax credit monetization for solar and storage assets, Tallarna is developing performance insurance for solar+storage in commercial real estate, and Energetic Capital supports a tax credit insurance for small/medium projects.

Revenue
Guarantees
×
Revenue Guarantees

What is it?

Revenue guarantees mitigate risks by offering financial protection against lower-than-projected revenue for performance, market-based, or utilization-based revenue streams.

How does it work?

Many investors are unfamiliar with performance, utilization, or arbitrage based energy storage revenue streams, making these business models appear risky. Revenue guarantees offset risk by providing compensation if projects fail to earn a minimum threshold of revenue. 

Who could provide it?

Insurers, government agencies, strategic investors.

Who does provide it?

Strategic investors such as Uber’s partnership with New York-based startup to enable EV charging infrastructure build-out. In Texas’s ERCOT market, New Energy Risk ensures merchant battery storage revenue streams by insuring the performance of projects’ forecasting and bidding optimization technology.

Standardized Underwriting & Infrastructure Platforms
×
Standardized Underwriting & Infrastructure Platforms

What is it?

Streamlined due diligence processes from capital providers and project finance platforms can significantly reduce transaction costs. 

How does it work?

Standardized underwriting can simplify funding for smaller projects by focusing due diligence on non-standard elements, enabling lenders to review and fund more projects. 

Who could provide it?

This solution would require collaboration across capital providers, financial innovation companies, and insurance providers to set agreed-upon industry-wide parameters for assessing new projects.

Who does provide it?

The solar industry has successfully adopted this approach and energy storage is primed to follow. Software platforms like Banyan Infrastructure can support the process by centralizing project data and workflows to enable faster decision making.

Tax Credit
Marketplaces
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Tax Credit Marketplaces

What is it?

Tax credit marketplaces are platforms that explore innovative ways to bundle tax credits from smaller projects into securities.

How does it work?

Tax credit marketplaces create new avenues for banks, insurance companies, and large corporations to offset tax liabilities while supporting smaller electrification projects. Through aggregation, these marketplaces help smaller projects overcome financing gaps by lowering transaction costs and increasing access to tax equity where they wouldn’t normally meet investment thresholds. 

Who could provide it?

Fintech platforms that support tax credit monetization and aggregation. 

Who is already doing it?

Giraffe is pioneering the aggregation of Inflation Reduction Act (IRA) tax credits into insured portfolios. Basis and Crux are actively working to create new mechanisms to tax credit trading and bundling.

Performance-Aligned Equity Investments
×
Performance-Aligned Equity Investments

What is it?

Investors that offer equity investments into early FOAK/FOM projects may incorporate Rights of First Refusal to balance out risk across future projects or other performance-based criteria.

How does it work?

These investments help early-stage projects secure capital by offering strategic investors a more favorable financial arrangement, e.g. providing equipment at cost for equity. This structure increases lender confidence, making it easier to secure debt financing. 

Who could provide it?

Strategic investors such as manufacturers, feedstock providers, or offtakers

Who does provide it?

SK E&S, a subsidiary of South Korea’s SK Group acquired a majority stake in Key Capture Energy to accelerate the deployment of large scale storage projects

Concessionary
Capital
For Community
Partnership
×
Concessionary Capital For Community Partnership

What is it?

Grants, low-interest loans, or incentives offered by capital providers to projects developed in partnership with community groups.

How does it work?

Partnerships with local communities can build project support, streamline the development process, and open up funding through federal, state, and philanthropic resources. 

Who could provide it?

Mission-driven, philanthropic or publicly funded capital providers.

Who does provide it?

Government agencies provide incentive programs to support community-led and community-partnered projects, while philanthropies are providing grants and low interest loans. The NY-BEST Strategy for Community Partnerships and Equitable Energy Storage Deployment can help project developers navigate the partnership process effectively.

Challenge 2:

The Uncertainty of the Development Process Creates Investment Risk

The Uncertainty of the Development Process
Creates Investment Risk

The Uncertainty of the Development Process
Creates Investment Risk

In a highly regulated market like New York, challenges in securing key approvals and bearing large capital outlays far in advance of revenue generation can increase project risks and make traditional financing solutions harder to secure. This cash flow mismatch creates a critical gap that further hinders developers' ability to advance through the development stage to construction.

Inflated development costs tend to favor well-capitalized incumbents, making it even harder for smaller developers to bring innovative ideas to market. Securing development-stage financing is notoriously difficult as most capital providers are hesitant to fund projects until the binary risks of project development are resolved.

PERMITTING

Delays and unexpected costs during permitting pose significant challenges for energy storage projects, particularly those involving new technologies. Developers must account for expenses related to securing approvals, including hiring consultants, performing additional engineering, and managing relationships with authorities having jurisdiction (AHJs). However, permitting timelines are often opaque or uncertain, and delays can put projects at risk of missing incentive program deadlines or incurring penalties from government agencies and utilities.

REAL ESTATE

Another challenge facing developers is the scarcity of land Downstate where electricity prices are most lucrative and where opportunities for energy storage projects to provide immediate grid benefits are most significant. This creates competition with real estate developers and large corporations that are vying for prime sites. While recent zoning reforms have opened new sites for energy storage in New York City, permitting pathways for these areas are still developing, making supply uncertain in the short term.

INTERCONNECTIONS AND EQUIPMENT

While there are feedback loops for developers to engage with utilities about interconnection, the process is complex and requires developers to spend significant capital early in the development process in order to meet needed milestones. In addition, although there are some resources designed to help developers navigate the process, like Con Edison’s Simplified Process Flow Chart, developers still experience challenges accessing information on the need and associated costs for grid upgrades to facilitate interconnection. Developers may secure a site but face delays in understanding the full financial feasibility of the project. This uncertainty introduces financial risk, particularly when significant capital expenditures are required to see the project through.

Actionable Solutions to Alleviate Investment & Project Risk

Investors willing to collaborate and be creative in this space are giving themselves a leg up into future lucrative investment opportunities as developers scale from First-of-a-Kind to First-of-Many and beyond. The Energy Storage Capital Challenge uncovered the following emerging, actionable solutions to reduce risks associated with permitting, interconnection and equipment, and real estate.

Technical Assistance
Programs
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Technical Assistance Programs

What is it?

Technical assistance programs provide financial support for services or in-kind expertise to cover the cost of feasibility studies, permitting support, performance testing, etc.

How does it work?

Technical assistance programs help projects address high-risk early-stage development activities, successfully navigate key development activities, and generate data insights that boost lender confidence. 

Who could provide it?

Governments, quasi-government entities, academic institutions, and philanthropies via grants, funding, or direct technical expertise.

Who does provide it?

The DOE Voucher program, NENY’s Technical Assistance Program, and project-level assistance from Centers for Advanced Technology.

Site
Leasing
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Site Leasing

What is it?

A financial product allowing developers to lease, rather than own, a site for infrastructure supporting solar, battery storage, and/or EV fleet charging.

How does it work?

It provides developers with access to essential real estate and potentially existing infrastructure without bearing the upfront costs of ownership, allowing them to focus on project development instead of site acquisition. Site leases are sometimes bundled with interconnection costs, streamlining access to critical infrastructure under a single agreement.

Who could provide it?

Real estate investment trusts, infrastructure funds, and providers with long-term capital.

Who does provide it?

Greenbacker Real Estate, an arm of Greenbacker Capital Management, focuses on acquiring, electrifying, and leasing sites to developers for clean energy projects.

Interconnection
Debt Products
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Interconnection Debt Products

What is it? 

Flexible debt products such as a revolving line of credit, that provide pre-Notice-to-Proceed financing for high-cost deposits or expenses related to interconnection and permitting activities.

How does it work?

It helps developers manage the upfront costs of interconnection and permitting by offering a revolving line of credit that can be drawn, repaid, and redeployed across multiple projects – ensuring efficient cash flow management until construction financing is secured.

Who could provide it?

Green banks, private banks, infrastructure funds, and financial institutions with flexible debt financing.

Who is already doing it?

The NY Green Bank (NYGB) provides this financing through its interconnection revolving lines of credit, allowing borrowers to access funds across multiple projects without the need for separate loans.

Bridge Loans
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Bridge Loans

What is it?

Short-term bridge loans that help projects secure financing to cover gaps until incentives, long-term funding, or key project milestones are secured.

How does it work?

Bridge loans provide immediate capital to developers, allowing them to continue project development while waiting for incentive payouts. 

Who could provide it?

Regional and national green banks, alternative lenders.

Who does provide it?

The New York City Energy Efficiency Corporation (NYCEEC) offers bridge loans to help cover short-term financing gaps.

Concessionary Debt
Facilities
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Concessionary Debt Facilities

What is it?

Debt facilities that are backed by mission-driven investors or government agencies that can provide concessionary capital to support community-focused projects.

How does it work?

These debt facilities lower borrowing costs and enhance creditworthiness for developers tackling early-stage expenses, attracting private investment and supporting the development of clean energy projects, particularly in disadvantaged communities. 

Who could provide it?

Green banks, community development financial institutions, commercial banks, and non-profit lenders can leverage dedicated debt facilities to scale clean energy investment.

Who does provide it?

The NY Green Bank (NYGB) provides concessionary capital through the Community Decarbonization Fund.

Development Simple
Agreement For
Future Equity
×
Development Simple Agreement For Future Equity

What is it?

Development Simple Agreement for Future Equity (D-SAFE) is a funding tool designed to ease financing for the development stage of projects. 

How does it work?

It offers flexibility by allowing repayment like a loan at the company's discretion or conversion to equity at the investor's choice. Although the funding is directed to the parent company, it can be allocated to specific projects. This reduces investment risk for financiers, who can convert the D-SAFE to equity if the project fails. 

Who could provide it?

Mission driven equity investors willing to take on higher risk positions.

Who does provide it?

Elemental Impact developed this product in partnership with law firm Wilson Sonsini Goodrich & Rosati in June 2024.

Case Studies

Case Studies

To test out replicable strategies for capital providers to adopt and scale, we used our $200,000 grant pool to support novel financing solutions for three projects.

This Is The Moment
to Jump In

This Is The Moment
to Jump In

This Is The Moment to Jump In

For capital providers who have been hesitant to test the market’s waters, this is the moment to jump in.

The capital providers backing innovative energy storage projects are poised to receive promising returns as first movers into new business models and development pathways that can be scaled across New York State and beyond. Forward-looking capital providers are already creating tailored development financing products, standardizing underwriting, and building partnerships with non-traditional partners like philanthropy, green banks, and insurers to build a capital stack that can juice returns for their investments. Smart funders are also building in rights of first refusal to ensure they can lock in the benefits of lucrative business models.

For capital providers who have been hesitant to test this market’s waters, this is the moment to jump in–or risk missing out on a once-in-a-generation opportunity. The vision ahead is New York State’s grid providing backup power during heavy snowstorms in Buffalo, mitigating new demand from electrified buildings and vehicles in Ithaca, and supporting peak demand events with clean energy allowing for the rapid shutdown of the State’s dirtiest power plants in Queens.

With dedicated leadership at the State and local levels and an energized ecosystem of resources, we’ve built the foundation of a market that works for developers, regulators, and capital providers alike. It will take capital providers with a willingness to collaborate and ideate to unlock the next step—the pipeline of innovative energy storage projects.

New York’s energy storage market is a template for how we will tackle tough deployment challenges to build our nation’s energy future. We have the momentum and creativity we need to build new pathways to New York’s energy grid of the future together. Let’s dive in.

Ready to Jump In?