Romanacci previously headed up Head of Enel Green Power North America, the clean energy IPP arm, before taking his current position in December 2023. The larger group he now leads also provides demand response, e-mobility solutions and services, energy trading, advisory and consulting services.
Our interview centres around the firm’s grid-scale BESS activity in the US and his views on the major trends affecting it. Most notably, he says the industry ultimately needs local manufacturing to overcome supply chain uncertainty and that further clarity is still needed for the standalone energy storage investment tax credit (ITC).
Enel North America overview and positioning
Energy-Storage.news: Can you give us an overview of Enel North America’s operational BESS portfolio and its pipeline?
Paolo Romanacci: Enel operates 9 utility-scale BESS with another 5 under final commissioning or construction, all in ERCOT. These 14 sites represent about 1.5 GW of capacity. We have stand-alone and hybrid renewables-plus-storage projects in development in markets across the US.
How much of the BESS development and operational process do you do in-house versus contracting out? Particularly around early-stage development, project design, EPC and optimisation/route-to-market.
Enel does all early-stage BESS development and siting in-house, capitalising on our years of experience in the field. Early project design is also done in-house along with much of our market strategy, while for EPC we work with leading technology providers. Our operations and maintenance is a combination of service agreements with BESS integrators and in-house personnel.
What do you think are the biggest challenges for the US BESS developer-operator industry as a whole in the coming few years?
Years-delayed interconnection queues, along with rampant supply chain uncertainty, are hindering BESS project development. The US BESS industry is still a nascent industry with growing pains. What we ultimately need is increased domestic manufacturing to enable a fast, localised industry, but that won’t happen overnight.
In the interim, we need rules that offer greater supply chain clarity and certainty. We also need regulations that consider the flexibility and the many grid benefits BESS offers compared to conventional energies and, in return, compensate developers and operators fairly.
And what are the solutions that you at Enel are bringing to the market?
Enel’s scale enables us to navigate these headwinds and play a role in leading the BESS industry as it becomes a major component of the energy sector. Enel has tremendous in-house expertise and global relationships with leading suppliers.
We have a diversified BESS development pipeline across geographies, energy markets and plant configurations (standalone or co-located). We also possess the digital sophistication necessary to control our BESS solutions in compliance with grid rules, which improves grid reliability and the BESS unit’s performance and ultimately increases return on investment.
ERCOT, Texas market
Regarding the ERCOT market, what are the learnings you can share from being the biggest BESS operator there?
ERCOT has some of the highest BESS penetration in the world, but it’s still a young market. That means all participants are learning as we go. Developers, suppliers and grid operators are constantly sharing information and evolving. For example, we’re eager to see the outcome of ERCOT’s Real Time Co-Optimisation and Batteries program to more adequately value the unique role of BESS in the energy market.
Our experience as the largest BESS operator in ERCOT reaffirms how critical this technology is to grid operators. As we face increasing load from electrification and data centres, more frequent extreme weather events, and more renewables deployment, BESS plays a unique role in preserving reliability and affordability. When it counts, BESS steps in—Enel is frequently deploying ancillary services to stabilise the grid in periods of high demand.
Staying on ERCOT, what is your strategy to deal with market saturation which appears to be starting to happen already?
As we consider the significant projections of growth in both load and intermittent generation in ERCOT, it’s clear that there’s still a lot of room for new BESS projects. But we need non-discriminating market structures and favorable price signals for energy storage to reach the next level.
In the meantime, we manage the increasingly saturated environment by diversifying our value streams through qualifying for as many BESS-eligible markets as possible. Enel also uses our own proprietary bidding optimisation software and in-house trading desk, which offer a competitive advantage.
Augmentation, BESS providers and wider US market trends, including tax credit incentives
Augmentation is a big topic – have you started to augment BESS projects already, and what can you say about that process?
Augmentation isn’t part of our strategy at this time. However, it’s a young and evolving market, and we’re prepared to evolve with it if needed.
How do you approach choosing a BESS technology provider? It is a highly competitive and fast-moving space, with market forces and US policy measures moving prices around frequently recently. Which BESS providers have you primarily used to date?
At our scale, we don’t work with a single exclusive provider but regularly engage with many of the leading technology providers while monitoring both the regulatory and technology landscape.
The US BESS market appeared to suffer a blip in Q1 2024 – installations were down as well as revenues for most technology providers focused on the US – what would you attribute this to?
I can’t say whether these phenomena are specific to Q1 2024, but the industry is still immature and experiencing growing pains. Insufficient price signals, supply chain constraints, permitting challenges—these are things that can impact the industry’s rate of growth. At the same time, the long-term trajectory is clear: the value of BESS is undeniable and will be an increasingly crucial part of the energy mix.
Standalone storage investment tax credit (ITC): can you comment on how much you have utilised this for projects, how much of the investment it has been able to cover and whether the new guidance on the domestic content adder has given the necessary clarity to leverage it?
Young technologies need a thorough incentive structure to achieve meaningful scale. That’s certainly true with BESS. We welcome both the stand-alone investment tax credit and all ITC and PTC adders, including for domestic content, as necessary incentives to speed up the growth of storage technologies and allow more certainty for investors.
Notice 2024-41 offered a more simplified and streamlined approach to qualification; however, our sense is that there won’t be sufficient domestic content for stand-alone storage projects until more cell production is achieved in the U.S. We’ve also found that some of our suppliers prefer the previous direct-cost method that in some cases may increase the likelihood of bonus eligibility.
The Inflation Reduction Act is an enormously complex and consequential law. Enel is eager to continue leveraging IRA policies to help build a modern, low-carbon grid in the US. We welcome additional rulemaking on IRA provisions, including clarification on domestic content bonus parameters for storage co-located with wind. We are also seeking clarity from the IRS that the treatment of standalone storage, in its qualification for the ITC, would mirror the ITC requirements for storage that is coupled with wind and solar generation assets.
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