Spearmint brings trading focus to batteries

PFI Yearbook
12 min read

A battery company led by a former power trader is less than a year old but has wasted no time amassing a big portfolio and finding project finance and tax equity to back it. Spearmint Energy CEO Andrew Waranch explains the company’s appeal. By Alison Healey

Since its official launch earlier this year, Miami-based battery storage development and trading firm Spearmint Energy has made a major acquisition, closed more than one project financing, and significantly grown its team.

The company characterises itself as a “green merchant energy trading company founded to combine innovative financial solutions with deep knowledge of trading and renewable energy development”, with a goal to accelerate the delivery of stable, inexpensive, renewable energy to the power grid.

The Spearmint platform comprises three distinct strategies, including battery and solar project development, energy storage offtake, and renewables power trading, as it aims to combine stable capital deployment with opportunistic investment and risk management expertise. The firm is focused on regions where it can make the greatest difference in addressing supply intermittency and price volatility.

“Utilities, load-serving entities, and renewable developers also contract for storage, but given their lower risk tolerance aren’t as focused on the regions with greatest imbalances,” Spearmint explains on its Web site. The company aims to build and toll renewable energy assets to reduce carbon emissions, which it highlights as its core focus.

Spearmint is led by its founder Andrew Waranch as president and chief executive officer. Waranch brings more than 25 years of research, trading, and portfolio management experience across the electricity power markets and previously worked at energy trading firms Elustria, Elliott Associates, Deutsche Bank, Merrill Lynch, and Constellation Energy.

“I started working in the energy trading and modelling space in 1997, and gained a deep understanding of how units are dispatched to support short-term supply and demand,” Waranch told PFI.

“The biggest driving factor was the importance of balancing real-time generation, especially when supplied by intermittent renewables, with demand that fluctuates seasonally, and by time of day, and how this challenge led to severe short-term price spikes. Once battery energy storage was introduced, I immediately saw it as a game-changer from both a trading and social impact perspective, since batteries balance the market, increase grid stability, and enable widespread uptake of clean renewable energy sources.”

The passage of the Inflation Reduction Act (IRA) and its tax incentives for clean energy were a big positive for Spearmint in terms of securing financing and catalysing growth.

“The IRA’s recent tax credit provisions have created an accelerated pathway to finance projects that may not have been previously possible,” Waranch explained. “Further, the transferability provisions have dramatically increased interest in tax equity financing – through credit transfer – far beyond what had previously been available to wind and solar over the last 15 years. We are optimistic that government programmes will continue to promote BESS project development with both increased revenue opportunities and continued tax credit policies.”

The company has succeeded in attracting significant capital investment within its first full year of launch.

“I think many in the financial community have been especially drawn to Spearmint’s deep roots in the power trading industry, our focus on creating a diversified pipeline in regional markets with the best nodal specific opportunities, and our team’s mission-driven approach to using storage to solve today’s climate crisis. We continue to highlight how storage is faster, cheaper, quicker to build, and cleaner than gas-fired peakers,” Waranch said.

In its most recent transaction, Spearmint closed a US$92m tax equity investment in its 150MW Revolution battery storage project in Texas via Greenprint Capital Management. The transaction marked one of the first applications of the ITC structure for a standalone battery energy storage system following the passage of the IRA. Revolution reached mechanical completion and is scheduled to begin operations this year. The project will bolster reliability and increase access to renewable energy in ERCOT.

In June, Spearmint closed a US$200m credit facility with investment management firm Aiga Capital Partners, which focuses on sustainable infrastructure assets. The term loan will support development of Spearmint’s 1.2GW portfolio of battery storage assets in Texas’ ERCOT power market and continued expansion of its portfolio across the US.

The company has worked hard to create revenue certainty for battery projects.

“Despite increased competition for financing among BESS developers, Spearmint has been fortunate in that we have been able to successfully secure financing for our projects and a pathway for revenue certainty by using our innovative, creditworthy offtake structure,” Waranch said.

“We attribute this success to our team’s considerable knowledge of different financing structures, experience in offtake contracts across the energy trading industry, and knowledge of the way in which new, more efficient technology is rapidly changing market opportunities. Furthermore, given the Spearmint team is comprised of individuals with varied finance and credit backgrounds, we have a deep understanding of commodity collateral structures and requirements.

"As a result, we believe we have the experience required to work with a variety of financing partners to establish credit support and innovative solutions that are aligned with lenders’ needs. We also view our ability to fill a gap – specifically as it relates to the lack of ESG/green focused offtake strategies available to investors today – as a unique advantage. We believe all of these factors, when taken together, have provided us with the ability to overcome many of the revenue challenges that other BESS developers currently face.”

Some additional obstacles remain as the company tries to grow at the pace its leader envisions.

“Battery development is currently growing rapidly across all regional markets as utilities, developers, and regulators understand the incredible value storage projects bring to the grid,” Waranch said. “However, as is true for all new technological advancements, there remain many obstacles – specifically regulatory, financial, and societal – that need to be overcome to achieve widespread implementation of BESS.

"As it relates to regulatory obstacles, political backlash against the implementation of BESS by entrenched, older thermal generation is just one roadblock that has made it more challenging for BESS developers to meet the massive demand for interconnection. While individual ISO and state level programmes are certainly taking the steps required to overcome this roadblock and help untangle interconnection hold-ups, it will not happen overnight, particularly given obstructionist efforts from older, less efficient carbon intensive gas-fired peakers," he said.

"On the finance side, given that battery energy storage as an asset class is still nascent and very much evolving, some ultra-conservative lenders are not yet fully comfortable with the business model, particularly as it relates to merchant components of revenues. Tax equity and tax credit transfer are also still new and evolving, however, with intense interest from large corporate buyers. Finally, on the societal side, we are dealing with supply chain issues and a lack of readily available supplies required for widespread implementation of BESS. This backlog, coupled with the fact that the industry does not presently have a large enough EPS workforce to meet the demand for BESS buildout, has forced a delay in the completion of many projects," Waranch said.

"All said, we believe obstacles will always exist in both burgeoning asset classes like battery storage, as well as more mature asset classes that have been around for hundreds of years. While further education, resources and policies are certainly required to help the BESS industry grow at the pace needed to meet demand, we are optimistic about the future and look forward to having a hand in helping to positively shape the industry for years to come.”

Spearmint Energy has grown its team to 34 people. The goal is for roughly half to work from the Miami office, 25% in a development office in Minneapolis, and others in Texas, Chicago, and New York. The company has assets in four regional power markets in the US and is aiming to be in as many as six within the coming months.

Waranch is quick to give credit to his team for the company’s rapid scale-up. “I created Spearmint in partnership with an outstanding team who has a unique trading focused view of the world and significant expertise in the power market,” he said.

Kevin Kelley, chairman of the board, is the founder and president of Roscommon Analytics, an investment management firm focused on the energy markets, with a focus on power trading. Key team members include Prudence Heck, head of research and analytics. She previously worked in interest rates derivatives valuation at Deutsche Bank and before that covered natural gas and power at Noble Americas Gas & Power and Elustria Capital Partners.

Peter Rood, chief development officer, has nearly 20 years of clean energy development experience to the firm, including over a decade of experience developing energy storage projects resulting in more than US$4bn of deployed capital. Previously, he led the development of a 3.5GW battery storage portfolio at GlidePath Power Solutions, and earlier held roles at RES Americas, NRStor, Acciona Energy, and Gamesa Energy.

Gina Wolf, senior vice-president of strategy and project development, previously served as global portfolio strategist at Meta Platforms. Wolf has more than two decades of renewables experience and was previously head of development regions for Enel Green Power, overseeing wind, solar, and battery storage development at sites across the US and Canada. Earlier in her career, she worked at Tradewind Energy, Infigen Energy, Element Power and Invenergy. She is responsible for project strategy, mergers and acquisitions, and greenfield development for the Spearmint Energy portfolio.

Jake Dahm, former senior director of development at Avantus, joined Spearmint as senior director of development responsible for Spearmint’s mid and late-stage project pipeline. At Avantus, he led development strategies across the CAISO and ERCOT power markets and worked at 8minute Solar Energy.

Spearmint appointed former Capital Dynamics executive Yelena Kuznetsova as director of sustainability and ESG. Kuznetsova was senior vice-president of marketing and communications at Capital Dynamics. She has held roles at Rockefeller Capital Management, French asset management firm Tobam, and Societe Generale's corporate and investment bank in New York, London, and Paris.

Kuznetsova will be responsible for overseeing Spearmint’s ESG policies and disclosures, developing and advancing corporate and project-level ESG initiatives, and ensuring the company continues to maintain compliance with federal and state-level ESG regulations. She will develop environmental planning and battery recycling programmes; work with procurement to evaluate suppliers’ codes of conduct, mineral sourcing, and labour policies; organise non-profit work and stakeholder partnerships; and track Spearmint’s progress toward carbon emissions and savings goals.

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