The global grid-scale battery market has expanded at lightning speed over recent years. From a modest valuation of $4.2 billion in 2022, the market is projected to reach $31 billion by 2032, growing at a compound annual growth rate (CAGR) of 18.2%. This growth makes sense when looking at the equally rapid growth in the integration of renewables into the grid. Compared to a few marque projects a decade ago, grid-scale batteries are now crucial for grid stabilisation. But while the demand is growing, battery projects also represent significant challenges for financiers accustomed to more traditional green infrastructure opportunities.
From a debt or equity perspective, the nascent and evolving nature of the battery sector means the bar for reaching an investment decision is very high, creating a "bankability gap" between developer milestones and institutional capital requirements.
Even before an investor weighs up the potential return on investment, they have to commit a significant financial outlay for project due diligence.
For developers, this means delivering projects to the open market that are truly shovel ready. However, shovel ready means different things to different developers. For some, the successful completion of land acquisition coupled with preliminary project design, planning approval and grid connection approval represents a shovel ready project in itself. But from an investment perspective, this milestone is simply origination. While a hugely important milestone, it is not a point where most investors would engage. In Australia for example, there are multiple projects at this point, but they don’t yet represent a potentially liquid asset for capital markets.
Securing revenue certainty
A truly shovel ready project from an investment perspective must surpass the due diligence phase, which means a project securing revenue certainty (known as offtake agreement) with back-to-back procurement documents to meet the obligations of the obligations of the offtake agreement. These procurement documents are typically “split scope” contracts, covering Battery Energy Storage System supply agreement, Balance of Plant agreement, Construction Management Services agreement and long term operational and maintenance contracts that all need to be woven together with technical specifications, division of responsibility, engineering studies and designs. These agreements are reviewed and summarised by independent professional service firms to formalise the due diligence package covering market, legal, technical and tax/accounting and insurance. This due diligence package is the most fundamental marker for any investment decision and the level of scrutiny and oversight through this stage requires a significant investment from any potential investor.
As such, investors at this point must take a judgement call on the likelihood of a due diligence package being approved. For developers, it is critical to be able to finalise and package up the due diligence items ahead of engagement to de-risk the due diligence investment for any potential lender or buyer. Many projects fail at this hurdle and are passed over before even entering due diligence phase because potential investors can’t be assured that due diligence will be manageable. With a potential due diligence investment in the millions of dollars covering legal, technical, and financial advisory support, an investor cannot afford to enter into exclusivity on a transaction without a very strong likelihood of the project proceeding. Like a home buyer who invests thousands on building survey after building survey, there is only so many times this can happen without buying a house.
This is why at Pacific Green we have a continual focus on ensuring we step through each preparatory phase of a project, ahead of going to market. This does mean a developer holds more financial risk up front but this is a fair exchange for securing long-term project investment or sale. Our Limestone Coast North Project is a case in point. The 250MW / 500MWh development was sold to Intera Renewables, the infrastructure investment arm of Palisade Investment Partners, in March 2025 but it was a transaction 18 months in the making. Planning approval was the first key milestone, but the team was also focussed on delivering a project that was fully de-risked for the market. This meant identifying and securing the battery procurement and delivery through our Shanghai procurement hub. It also meant securing a 100% offtake agreement with ZEN Energy, ensuring a guaranteed revenue stream. Finally, it meant completing all necessary technical requirements and going beyond regulatory approvals and compliance and covering grid integration, operational guarantees and risk management.
Delivering projects that are truly shovel ready
With these steps covered off, the Limestone Coast North Project reached true ‘shovel ready’ status. Each step of the process, and each closed item is logged and filed, creating assurance materials ready for the data room. In the case of the Limestone Coast North Project, there were still queries raised and changes required while under exclusivity with Intera Renewables. However, the due diligence process was underpinned by the comprehensive due diligence package already prepared, meaning any issues were not material to the point of threatening the transaction.
The project reached financial close in March 2025 after the completion of due diligence. There are areas of this specific project which may be different next time. But the core commercial approach will always remain. At Pacific Green, it is critical this model is followed to provide capital markets with assurance that their considerable efforts and financial outlay through the due diligence process will result in a bankable asset.
Publish date: 04 June, 2025