Community-Scale Battery Storage: The Urban Energy Asset Class You Haven't Heard About

“Most urban grids are pretty dirty. You might have a lot of clean energy development outside of the urban area, but how do you use it in an urban area?” poses Karen Alter, Chief Marketing Officer at NineDot Energy, highlighting one of the most pressing challenges facing America’s cities. The answer, it seems, lies in an emerging asset class that’s attracting significant institutional investment: community-scale battery storage.

NineDot Energy, the largest developer of battery storage systems in the New York metro area, has attracted $500 million in investment by solving a crucial urban infrastructure problem: how to bring clean energy into dense city environments where traditional renewable energy projects aren’t feasible.

The Urban Energy Challenge

The challenge is particularly acute in New York City, where the bulk of energy is generated upstate but consumed downstate. “When it comes to clean energy specifically, you can’t build a solar farm in New York City. There’s just no land,” Alter explains. “But what you can do is build what we call community-scale sites, which are 5,000-10,000 square feet, quarter of an acre sites that can store five megawatts.”

This approach has proven particularly attractive to institutional investors, with NineDot securing backing from Carlyle Group – a rare achievement for a company of their size. The company now has 50 committed projects in various stages of development, operations, or construction across the New York metro area.

What Makes Battery Storage “Bankable”?

According to Alter, several key factors make community-scale battery storage projects attractive to institutional investors:

1. Regulatory Certainty: New York State’s commitment to 100% clean energy by 2040, including a target of six gigawatts of storage by 2030, provides long-term policy stability. “If you’re investing in a 20-year asset, you kind of want to know what’s going to happen over that 20 years,” Alter notes.
2. Reliable Revenue Streams: Projects benefit from NYSERDA (New York State Energy Research and Development Authority) incentive payments and contracted revenue streams through various programs, providing predictable returns.
3. Proven Technology: While not tied to specific vendors, NineDot uses technology that meets Fire Department of New York (FDNY) approval – considered the most stringent standards in the United States. “It’s not that we’re tied to Tesla mega packs, but that is the main technology approved right now,” Alter explains, highlighting their commitment to working with proven solutions while maintaining flexibility.
4. Strategic Location: The company focuses on commercial and industrial zones across New York’s boroughs, targeting sites between 5,000-10,000 square feet that can efficiently connect to the grid.

The Peak Demand Solution

One of the most compelling aspects of battery storage is its ability to address peak demand challenges. “During the really hot, sticky parts of the dog days of New York City summers, everyone comes home turns on their air conditioning, and the grid is really stressed,” Alter explains. Historically, this was managed through “peaker plants” – old, polluting fossil fuel plants activated only during peak demand.

Battery storage offers a cleaner alternative: charging overnight when the grid is cleaner and deploying stored energy during peak afternoon hours, eliminating the need for these polluting peaker plants.

The Future of Energy Storage

While NineDot’s primary focus remains on community-scale stationary storage, they’re keeping a close eye on emerging trends in the energy storage landscape, including vehicle-to-grid (V2G) technology. “Cars are battery storage,” Alter explains. “They plug in most of the time they’re not being driven. Some EVs have batteries that allow you to push energy back onto the grid.” While still in early stages, V2G technology could eventually create additional revenue streams for vehicle owners while providing grid support. The company has already conducted an initial pilot in Brooklyn with Revel, offering early insights into this emerging technology’s potential.

Investment Implications

While there’s growing interest from smaller investors and family offices in energy storage as an asset class, NineDot’s projects typically attract institutional financing due to their scale. The company’s financing approach reflects its scale of operations. “Because we tend to finance in big chunks,” Alter explains, “we get a lot of interest from very small funds or small family offices.” However, while they wouldn’t rule out smaller investors, she emphasizes that “this is institutional financing.”

For real estate investors and developers watching the space, community-scale battery storage represents an intriguing opportunity at the intersection of clean energy, urban infrastructure, and real estate. With supportive regulatory frameworks, proven technology, and growing demand for clean energy solutions in urban environments, this asset class appears positioned for continued growth.

As cities nationwide look to New York’s model for clean energy integration, the lessons learned from NineDot’s success could help shape the future of urban energy infrastructure investment across America.