U.S. Energy Storage Projects Command Top Dollar for Investment Tax Credits

Investment Tax Credits (ITC) for energy storage projects are fetching higher prices than those for any other clean energy technology in the U.S., a recent surge in interest following the implementation of the Inflation Reduction Act's transferability provision. As reported by Energy Storage news, the Sierra Estrella Energy Storage project epitomizes this trend, securing a groundbreaking $707 million in financing. This signifies a pivot to a broader investor base in clean energy, drawing increased leverage from tax equity concessions.

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According to Crux, a leader in tax credit intelligence, the latter part of last year saw tax credit transactions, particularly in energy storage, transcend expectations. The new landscape allows developers to sell tax credits, enhancing the influx of capital in the sector. Crux CEO Alfred Johnson notes the flourish of activity between August and December 2023, with an estimated $7-9 billion in tax credit transfers occurring across the clean energy landscape.

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Market Dynamics of Tax Credit Transferability

Under this new financial climate, energy storage ITCs reportedly hit a high of $0.94 on the dollar, surpassing rates for other renewable technologies, indicative of the robust demand for large-scale energy storage solutions. The report shed light on the particular pricing premium of energy storage, attributed in part to more substantial deal sizes, averaging $48.25 million, and the consequent higher remunerations to sellers.

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Technology Specifics and Market Predictions

While energy storage led the ITC pricing charts, utility-scale solar and wind PTCs also saw significant activity with large average deal sizes of their own. Notably, the former was priced at $0.92, the latter reaching $0.934. The data suggests that despite initial hesitancy within the tax equity market towards standalone energy storage, the sector's proven resilience and performance have quelled concerns, with storage ITCs often incorporated into tax equity deals even before the boon of transferability.

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Alfred Johnson elaborates that the storage projects which benefited from ITC transfers were typically larger-scale operations helmed by established players, a factor contributing to the premium pricing observed. Additionally, wind ITC deals were scant due to prior secured financing, obviating the need for fresh transferability-driven transactions.

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Source: Energy Storage News