Takeaways from Infocast: Storage Finance Is Becoming More Disciplined
Storage has won the growth argument. Now the focus is on bankability.
The U.S. battery storage market has significant momentum, but the financing environment is becoming more selective.
Storage is maturing into a more disciplined and increasingly bankable asset class.
Comity attended Infocast’s Finance, Storage, and Investment Conference last month. During the conference, we identified key project dimensions that are shaping how projects are underwritten:
- Policy risk is moving earlier in the underwriting process.
- Permitting, community engagement, and fire-safety review are becoming material risk evaluation items.
- Lenders are placing greater value on contracted revenue.
- Market, sponsor, and offtaker concentration are becoming central credit considerations.
- Data center growth is creating major opportunity while introducing new risks.
- Interconnection remains a major bottleneck, with surplus interconnection offering a potential path forward.
- Tariffs, FEOC rules, and supply-chain bankability continue to shape project economics.
The opportunity ahead remains substantial. But capital will increasingly flow to projects with durable revenues, credible counterparties, strong sponsors, clear permitting pathways, and bankable supply chains.
Political and Policy Aspect Have Moved Up the Underwriting Funnel
Panelists pointed to the practical effects of policy changes: tax credit rules, tariff exposure, permitting, and foreign entity of concern restrictions are all shaping whether projects can move forward.
Stable permitting and policy visibility are moving earlier in the underwriting process. Fickle policy can affect both project economics and execution timing, while developers have rushed to safe-harbor projects that were already initiated. States are creating their own clean-energy finance programs.
That dynamic puts state-backed institutions in a more important role.
Local Pushback and Fire-Safety Review Are Now Timeline Risks
Speakers cited cases where fire departments became a gating item for project permits.
Permitting risk is no longer limited to early-stage development. Community and fire-department concerns can surface late enough to affect construction timelines.
Some institutions have been engaging with developers and fire departments to help standardize requirements and reduce surprises. Fire departments are becoming more involved, including cases where changes are requested during construction. That has pushed lenders to increase diligence on EPC plans, site design, safety protocols, and execution assumptions.
For developers community engagement and local authority alignment cannot be treated as check-the-box exercises. They are now part of what makes a project bankable.
Storage Finance Is Shifting Toward Contracted Revenue
Lenders are still willing to support strong developers in attractive markets, but fully merchant BESS is becoming harder to finance. Debt sizing is tightening, amortization is accelerating, and lenders are placing greater value on contracted or protected revenue.
ERCOT was repeatedly cited as the cautionary example. Early projects benefited from strong ancillary-service revenues and volatile price events, but growing competition has compressed margins and concentrated returns in a small number of scarcity periods. That creates an unattractive risk profile for lenders: missing a few high-value days can materially impair performance, while rapid repayment in strong scenarios can limit lender returns.
As a result, sponsors and capital providers are increasingly considering tolls, hedges, capacity payments, resource adequacy contracts, TBx-style products, and other structures that reduce downside volatility while preserving some merchant upside. California’s resource adequacy market remains important, while evolving rules in PJM and NYISO could create greater certainty for battery debt.
The main constraint is still offtake. Many projects remain merchant not because sponsors prefer the exposure, but because there are more projects than available contracted opportunities.
Market Concentration Has Become a Central Credit Issue
Geographical, technology, sponsor, and offtaker concentration all matter. Some lenders are forecasting concentration over the next three to five years, rather than only looking at the current portfolio snapshot.
Offtake concentration is also important. A portfolio may appear diversified by project count, but if the revenue relies on a narrow set of counterparties, markets, or event days, the lender may still view the exposure as concentrated.
There is a more nuanced view on sponsor concentration. Consolidation among solar and wind developers has created some sponsor concentration, but aggregation can also help projects access commercial financing and refinance out of more specialized sources of capital. In that sense, concentration is not always negative. It depends on whether aggregation improves institutional quality, execution capability, and access to capital.
Data Centers Are Reshaping the Power Finance Conversation
Data centers came up often. The more interesting point is that they are changing what demand looks like and making power contracts harder to underwrite.
The structures are getting more complicated: cogeneration, behind-the-meter projects, single data center offtakers, busbar PPAs, hub-settled contracts, and shared-basis risk. Each creates its own questions around credit, tenant quality, basis exposure, and how durable the contract really is.
One concern is timing. A data center tenant may sign for seven to 10 years, while the power asset needs a longer financing life. Even when the tenant is tied to a hyperscaler, the power contract may not have the same level of support. That leaves lenders asking for stronger parent credit support and being more cautious when one data center is effectively the whole offtake story.
So the diligence question has widened. It is no longer just, “Who buys the power?” It is, “Who is really standing behind the data center, and does that demand hold up for the life of the energy asset?”
Interconnection Remains a Bottleneck, and an Opportunity
Surplus interconnection was repeatedly identified as a potentially attractive pathway, especially where batteries can be added to existing renewable sites without disturbing the original asset. CAISO was viewed as relatively advanced in developing rules for batteries, while other organized markets still have work to do.
Storage can provide firming capacity near existing intermittent resources, potentially moving faster than greenfield interconnection requests. But the rules matter, and in some markets, limitations around grid charging under surplus interconnection can reduce value depending on the use case. The most significant interconnection challenge may still be the study parameters utilities apply to BESS. If those assumptions are too rigid or misaligned with how batteries actually operate, they can delay projects or make interconnection outcomes less financeable.
Manufacturing, Tariffs, and Supply Chain Rules Are Reshaping Project Economics
Conference notes referenced proposed new tariffs affecting imports from dozens of countries and the European Union, with implementation expected later in the summer. FEOC restrictions are also affecting new projects that were not under construction during 2024.
The earlier rush to build BESS in response to FEOC concerns appears to have abated somewhat, especially where the next major limiting date is several years away.
For manufacturers and developers, these changes are creating meaningful opportunities. Demand for domestically produced BESS equipment is growing, which could strengthen the U.S. supply chain and support greater project certainty. To translate that momentum into lender confidence, suppliers will still need to demonstrate reliable capacity, strong product performance, robust warranties, and clear contractual protections across the supply chain.
The Bigger Picture: Storage Is Maturing Into a More Bankable Asset Class
Storage is becoming essential to both grid reliability and the next wave of data center growth. As power demand accelerates and compute infrastructure needs increase, BESS will play a larger role in balancing the grid, supporting firm power delivery, and enabling new load.
The market is also becoming more disciplined. Clearer revenue structures, stronger counterparties, better-defined market rules, and more rigorous underwriting are helping storage mature into a more bankable asset class.
The opportunity ahead is significant.
Got a deal that hinges on power or counterparty risk?
That's our entire job. Comity de-risks energy transactions — lowering counterparty risk, improving project returns, and freeing up capital. Emailing us or booking a 30-minute call is the fastest way to find out how we can help.