In an interview with Key Capture CEO Brian Hayes, who is preparing to enter his second year at the helm of the storage development firm, he discussed the company’ interest in moving toward more contracted storage assets vs. ERCOT’s traditional merchant storage.

Hayes says the firm is currently utilizing its greenfield pipeline to “identify places where we can get tolling agreements or any other type of structured contracts.” This follows a trend that other storage developers in ERCOT are moving toward after low pricing volatility in 2024 forced many to reconsider their asset-based revenue streams. Hayes notes that by adding more contracted storage to balance out the portfolio, it allows the firm to be more efficient and “put more megawatts in the ground” overall.

“It’s much easier to raise capital off of a contracted asset than a merchant asset,” Hayes said. “That’s probably the biggest reason folks like us are moving in that direction.”

However, in Key Capture’s native Texas, Hayes notes while offtakers are available, the competition to secure those limited contracts is fierce. Despite this, he says it’s hard to tell if ERCOT will become oversaturated with storage overall thanks to high load growth projections that could continue to drive demand. For data centers in particular, Hayes says he and other storage providers are still trying to figure out how they can fit in.

“We see there should be a massive opportunity for storage to link up with [data centers], but it hasn’t been the perfect match yet,” Hayes said. “I think there’s a bit more of a trick to figure out how things will line up. But there are definitely lots of benefits with storage in terms of supply security that we can definitely support, so it does provide a very optimistic view in terms of additional opportunities coming through.”

Finally, Hayes notes the high penetration of renewables in Texas, particularly wind, makes it hard to predict when price scarcity will drive up returns for merchant storage projects in ERCOT.

“I think there’s still room for the volatility to come back thanks to the high penetration of renewables,” Hayes said.

So, while Hayes says ERCOT is “not off the table,” the firm is also looking elsewhere with potentially less competition to bolster its contracted asset base. Key Capture is currently coming off a big month-long period where it announced BTA contracts for two storage assets for a combined 129 MW in New York with the Long Island Power Authority, as well as its second ITC transfer deal for two 100 MW storage projects in Texas.

Looking ahead

In terms of what’s next, Hayes says Key Capture is looking at MISO, specifically states like Illinois, Indiana and Michigan where potential policy incentives and, in the case of Michigan, mandates are driving interest in storage as utilities like Consumers Energy sign more storage than ever before.

Hayes says Key Capture is looking at utilities in these areas that have signed a lot of renewables in recent years that “may need some storage as well.”

However, many utilities in the Midwest have a stated preference for signing BTAs for its power and storage projects rather than the tolling contracts that Key Capture is most interested in. While Hayes says Key Capture “definitely has a strong interest in moving toward contracts and tolls” over BTAs, he says the firm is also open to signing some BTAs as it did with the Long Island Power Authority in New York last month.

For now, while Hayes says the firm is “starting to see some positive signs,” it hasn’t closed anything beyond the 129 MW in New York and doesn’t currently have a 2025 project in the hopper.

“We’ve had some positive news in terms of making traction, but we’re not there yet as far as closing any of those things,” Hayes said.

In the meantime, Hayes says Key Capture is still working on heading up its new initiative to expand its M&A activity to “fill in where we have timing and maturity gaps on our projects.” Hayes says the firm is primarily seeking to acquire projects outside of its native ERCOT, though he notes price fluctuations and project timelines remain the primary driver.

“Typically when you get to late stage assets, you get a little more expensive, so it’s kind of balancing what’s the right timing between something ready to go in the next year vs. something that looks like it’s going to be attractive in the next two to three years that you can usually get for a better price because you’re taking on more risk,” Hayes said. “We are actively looking at lots of things but haven’t gone through with anything yet. We’ll keep searching.”

*This story was originally published exclusively for NPM subscribers.

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