Financing Long-Duration Storage in California

A 20-year project finance model testing which policies get a 500 MW / 50 GWh iron-air battery to financial close.

Individual project · “Financing the Clean Energy Transition” class project, Harvard Kennedy School, 2026

At a glance

Role Individual project
Methods 20-year project finance model; policy scenario and sensitivity analysis
Tools Excel
Skills Project finance, debt sizing and coverage, tax credits, capacity contract design
Available on request Two-page policy memo and the Excel model

The question

No long-duration storage project has reached financial close in California, even though the state will need multi-day storage to run a carbon-free grid. Which combination of policies would make one financeable, and what would it cost ratepayers?

What I did

I built a 20-year project finance model for a 500 MW / 50 GWh iron-air battery, with costs benchmarked to Form Energy’s project in Minnesota. It covers capital and operating costs, energy arbitrage and capacity revenue, three tranches of term debt, depreciation, and taxes, and solves for the sponsor equity each scenario needs. I tested five policies: the federal investment tax credit, a CPUC-procured clean firm capacity contract, a DOE loan guarantee, an O&M subsidy tied to delivered capacity, and a $100M capital grant.

The five policies tested in the model, the barrier each removes, who acts, and its effect on the project.
First operating year with all five policies in place: the capacity contract supplies about three-quarters of revenue.

What it shows

  • With all five policies and a $240/kW-yr capacity contract, the project clears its lenders’ test: minimum debt service coverage of 1.31× against a 1.20× requirement.
  • Equity returns hinge on the capacity contract. Reaching a 17.5% equity return takes about $310/kW-yr with a 50% ITC, and about $387/kW-yr with the 40% credit.
  • Because ratepayers would pay that contract, its size is the central question for the CPUC.

The memo and Excel model are available to employers on request. Contact me.