Milbank LLP Global Project, Energy and Infrastructure Finance partner Michael Klaus authored a Practice Note with Practical Law Finance titled, “Battery Energy Storage Financing Structures and Revenue Strategies.” The article offers a comprehensive overview of how project sponsors can monetize battery energy storage systems (BESS) and optimize project financing.
In the article, Mr. Klaus explores how BESS projects help stabilize the grid by storing electricity during periods of high supply and dispatching it during periods of peak demand, thereby reducing energy costs and supporting renewable integration. The Practice Note discusses financing structures such as capacity, tolling and resource adequacy contracts that are favored by project finance lenders for their stable cash flows. It also highlights variable revenue opportunities including energy price arbitrage, ancillary services and state-level incentive programs, explaining how combining these sources through “value stacking” can improve project economics. Finally, Mr. Klaus examines federal tax credits under Sections 48 and 48E of the Internal Revenue Code and the ways sponsors can monetize these benefits, including through traditional tax equity partnership-flip transactions and direct transfers of credits.
To read the full article, please click here.
