Representative investment case · Solar plus storage

A 10.37% IRR and 1.57x DSCR looked fine. Then I asked what the battery was actually being paid for.

I built a representative 120 MW solar PV plus six-hour BESS case using an 8.8 USc/kWh revenue assumption, US$184m total CAPEX and US$62m equity. The base case worked. The storage revenue and lifecycle assumptions needed much more evidence before I would rely on them for an investment decision.

120 MW solar PVSix-hour BESSUS$184m CAPEX10.37% project IRR

Where I started

I separated the battery from the solar case.

The model showed positive project returns, but storage was doing too much work in the investment story without a clear commercial explanation. I needed to see the charging source, usable energy, round-trip efficiency, cycling, degradation, augmentation, warranty limits and replacement cost in one place.

Six hours tells me the duration. It does not tell me what the offtaker pays for, whether the battery can charge economically or whether the assumed operating pattern survives the financing tenor.

My read

The battery needs a defined job that can be traced to revenue: energy shifting, firm capacity, peak support, dispatch compliance or a grid service. A broad claim about “renewable integration” is not enough for the model.

What I split out

  • Solar generation sold directly versus energy used to charge the battery.
  • Charging losses, discharge losses and auxiliary consumption.
  • Nameplate capacity versus usable capacity after operating limits.
  • Capacity fade, efficiency degradation and augmentation timing.
  • Contracted revenue versus upside that was not yet contracted.
  • Replacement and reserve funding versus normal O&M.

Where the case was weak

The storage assumptions carried more risk than the headline returns suggested.

AssumptionWhat could go wrongEvidence I would want
Single blended tariffThe tariff may pay for solar energy without paying separately for storage availability or dispatch.PPA schedules that define paid energy, capacity and performance obligations.
Static battery efficiencyRound-trip and auxiliary losses can change with temperature, load and ageing.OEM performance curves and guaranteed operating limits.
No augmentation planUsable capacity may fall below the contracted duration before debt matures.Degradation curve, warranty, augmentation timing and cost.
Unconstrained cyclingThe revenue case may assume more cycles than the warranty or charging source permits.Hourly dispatch case and cycle-throughput warranty.
Replacement outside the base caseFuture cell or inverter replacement can materially reduce equity cash flow.Lifecycle replacement schedule and a funding plan.
Comfort from one DSCR number1.57x can fall quickly when output, efficiency and COD are stressed together.Combined downside rather than isolated one-variable sensitivities.
What changed my view

I would not approve the storage case because the battery improves dispatch in principle. I would approve it when the contract pays for an operating profile that the technical design can sustain.

Downside framework

What I stressed

Tariff
Lower contracted price and delayed escalation.
Solar yield
Less direct energy and less charging energy.
Battery efficiency
Lower discharged MWh and a higher internal energy cost.
Availability
Lost dispatch hours and possible performance deductions.
Degradation
Faster capacity fade and earlier augmentation.
CAPEX / COD
Overrun, IDC, delayed revenue and more equity.
Debt
Higher interest, shorter tenor and less sculpting headroom.

The investment memo

I put the recommendation before the background.

The paper started with the decision I thought the committee should make: proceed, pause, reject or continue subject to conditions. Only then did I summarise the model, the assumptions carrying the result and the evidence still missing.

My recommendation was conditional. The project justified further diligence, but I wanted the storage revenue, dispatch case, warranty alignment and lifecycle cost closed before capital approval.

10.37%Project IRR in the representative base case
1.57xAnalysed DSCR before combined downside
US$62mRepresentative equity requirement
6 hoursDuration that still needed a proven duty cycle
Disclosure

This is representative analytical work. It is not a completed project, regulated recommendation, fairness opinion, lender commitment or evidence of financial close.

Before approval

These were the points I would close first.

Revenue

Define what the offtaker buys

Separate solar energy, stored energy, capacity, availability and dispatch obligations. Link each payment and deduction to the model.

EvidenceExecuted PPA schedules
Technical

Prove the battery can perform the contract

Reconcile charging, cycle count, efficiency, temperature, degradation, augmentation and warranty throughput.

EvidenceIndependent technical report and OEM warranty
Cost

Fund the full lifecycle

Include augmentation, replacement, major maintenance, insurance and contingency instead of stopping at the initial EPC price.

EvidenceLifecycle BOQ and reserve schedule
Finance

Size debt on the conservative operating case

Use combined downside to set leverage, repayment, DSRA and distribution controls rather than the strongest operating year.

EvidenceLender case and covenant pack

Investment committee support

Need a model review that leads to a clear recommendation?

Send the model, technical case, contracts and committee deadline. I will focus on the assumptions that can actually change the decision.

Discuss an investment memoView other work