Himanshu Saxena, chief executive officer of Starwood Energy Group Global LLC, has been with the investment firm for 10 years. He was named co-head of the business in 2015 and CEO in November.
Starwood, based in Greenwich, Connecticut, manages equity commitments of more than $3 billion focused on natural gas, renewable power and transmission. It moved into energy storage in 2016 with a $100 million investment in Stem Inc., which develops, owns and operates storage systems at customer sites in exchange for recurring lease payments.
Saxena answered questions from BNEF in a phone interview on Feb. 19.
Q: How is the storage business changing?
A: The storage business has flourished and blossomed in the past year. There is clearly a recognition that storage is here to stay and that it will play a more vital part in the energy supply chain.
Q: What are Starwood’s plans in the space?
A: We have been looking at a number of RFPs in different markets, in California and other places, where systems are looking for new battery storage. A lot of these are utility-scale grid storage, and they’re larger projects.
There are two parts to the storage business model. One is the behind-the-meter and the other is utility-scale, directly connected to the grid. We are not only working with developers but we are working with projects where we would be the developers. We’re tackling storage from all angles.
Q: The Federal Energy Regulatory Commission announced that storage will be eligible to compete on the wholesale side of the business. How important was that?
A: That was quite important because it allows storage to play in the same space as any other generator. It’s recognition that storage can be reliably dispatched from a distance. It allows batteries to be used to the fullest extent. That should increase and accelerate the penetration of storage in different markets.
Q: Where are we on the curve for storage?
A: There are two facets: the technology curve and the cost curve. The technology curve is: Can you increase the round-trip efficiency? Can you integrate it better with the grid? We know the batteries work; the question is how to make them work the best in different situations.
On the cost curve, we continue to see a decline that is more than a hope. A lot of that is driven by the electric vehicle industry. Battery manufacturers will commit to a declining cost curve. That makes it easier for us to assume the price in 2020 will be less than it is in 2018.
Q: What’s been the effect on renewables and storage of major companies using power-purchase agreements?
A: The trend of corporates procuring renewable energy is strong and accelerating. Google and Amazon have led by a wide margin. The tech companies started the trend, and then manufacturing companies, and then data-center companies, and now we are starting to see financial companies. They are picking up energy at a price that’s clearly low and a very good hedge.
Q: California has moved to support storage infrastructure with regulatory action. How much difference does it make what California is doing?
A: It makes a lot of difference. California was the first state to have meaningful solar penetration and then renewable penetration. Its support of storage means there is demand, and it means utilities are willing to write long-term agreements for those systems, which means there are developers and manufacturers working on it, and that helps the industry move forward. The lessons learned in California will be applied all over the country and maybe the world.