Stem Senior Director discusses new ERCOT portfolio and changing market dynamics

Fresh off the heels of a new partnership with Regis Energy Partners and Excelsior Energy Capital, Stem is supplying batteries for a four-project portfolio with more on the way.

The battery supplier announced the partnership last month capped off with a USD 400m portfolio of energy storage projects targeting the ERCOT distribution-connected project market. These are 9.9 MW projects, which have been Stem’s bread and butter in the state due to fewer regulatory hurdles reserved for projects under the 10 MW mark.

All of the currently announced projects, which will utilize Stem’s battery hardware and AI platform, have 2023 CODs. The firm is not ready to comment on how many more projects are coming beyond the initial four, but they have said more projects are to come.

The partnership was several years in the making; in an interview with NPM, Stem’s Senior Director of Business Development Cody Guidry noted Regis has been a partner for the firm in the ERCOT market since it entered in earnest just before 2021’s Winter Storm Uri rocked the state grid. Guidry says the firms clicked when they realized they had a similar view of the ERCOT storage playbook and began building out a portfolio of 9.9 MW distribution-connected projects.

Regis’ connections with Excelsior, which was already interested in getting into the storage market in a big way, made for a strong path toward the finish line with the financier stepping in to capitalize the portfolio. Excelsior co-founder and partner Anne Denman says Stem and Regis’ combined knowledge of the ERCOT market in particular was the key selling point for the arrangement and has indicated its partnership with both firms may extend beyond this initial portfolio.

“Excelsior values long-term partnerships with trusted leaders,” Denman said. “Stem and Regis bring the expertise, technology and regional insights.”

Stem CEO John Carrington says his firm is also already looking at the horizon in ERCOT and is interested in more partnerships as the firm moves to capitalize on high storage demand, particularly with financiers like Excelsior who may be emboldened by the storage tax incentives brought on by the IRA.

“The Texas storage market represents a significant growth opportunity for investors like Excelsior, and we will continue to partner with regional developers like Regis,” Carrington said.

This ERCOT portfolio will be made up of short duration batteries capping out at just two hours. Guidry says this is because these distribution-connected assets are best poised to benefit ancillary and reserve markets, which does not require longer durations.

However, while Guidry says he sees this market as the dominant one for storage activity in the state in the near-term, ultimately the ancillary service market will become saturated and the appetite for storage will transition to larger projects with longer durations better poised to shift solar generation to evening hours. While the distribution-connected assets are viable statewide, Guidry says he expects the best opportunities for these larger load-shifting projects will be in West Texas where land is abundant, renewable penetration is high and the population is low.

“The ancillary market will eventually become saturated, and the energy markets are very deep, so that’s where the long tail of opportunity is,” Guidry said. “But it is going to be a bit before that transition happens.

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


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