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.