M&A: Scale Microgrids CIO details drivers behind 500 MW Community solar portfolio purchase

Scale Microgrids closed an expansion agreement in late 2023 to acquire 500 MW of Gutami, Inc.’s community solar and storage projects across multiple states, including California and New York.

Each project will generate and store around 5 MW, with some co-located sites in New York generating up to 20 MW.

Between 50 and 100 projects will come to fruition in this multi-year agreement, Scale Microgrid’s Chief Investment Officer Julian Torres said in an interview with NPM.

Gutami will develop these projects while Scale will acquire, finance, and own them, in addition to the company’s existing 100 MW partnership in New York, which closed in December 2022.

Scale declined to specify locations, breaking ground dates and commercial operation dates, but the developer’s active in the PJM, New York ISO and the New England ISO markets, and the projects are in various early stages of development.

“It’s quite fresh,” Torres said. “One thing we're excited about, here, is the scale of this agreement, which will allow us to build and develop these projects with low-cost capital.”

Torres noted that this portfolio acquisition is a purchase commitment. Scale’s revenue contracts are typically microgrid service agreements with long-term, fixed-rates.

Scale Microgrid's business model

Since Scale’s founding in 2016 and the acquisition by Warburg Pincus in 2020, the company has focused on assets below 20 MW for standardization.

“This way, we can offer multi-asset microgrids — solar battery energy storage and a dispatchable, gas-fired asset,” Torres said. “We are a unique player in this market where we truly are technology agnostic.”

The development team has not disclosed particular elements of its operating mix, but the balance of Scale’s business is behind-the-meter, Torres said.

Although community solar is front-of-the-meter, it fits the company’s business model as its community customers are retail-metered participants: businesses and residential energy consumers.

Scale receives the benefits of larger scale projects through community solar programs, which allows them to offer microgrids as a service and optimize those for specific utility tariffs.

It also allows them to raise capital and offer services with no upfront CapEx required.

The NY-Sun program, the IRA interconnection adder, the Section 48 ITC, the 30% expansion of the Combined Heat and Power (CHP) ITC, and the 10% extension of the microturbine ITC are all valuable incentives for Scale Microgrids’ development.

Additionally, the California Public Utilities Commission (CPUC) Self-Generation Incentive Program (SGIP) has helped the development of Scale Microgrid’s BESS projects in the state, and the microturbine ITC extension has been useful for multi-asset microgrids, incorporating solar battery and dispatchable generation.

Programs such as California’s Clean Transportation Program is funding the adoption of electric municipal transit vehicles, which Scale Microgrids is using to build a microgrid with EV infrastructure for the Santa Clara Valley Transit Authority.

*This story was originally published exclusively for NPM subscribers last month.

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