Energy
Thursday, May 23rd, 2024 3:59 pm EDT
Key Points
- Orsted secures a substantial $680 million investment from JPMorgan for two U.S. clean energy projects, fueled by incentives from the Biden Administration’s Inflation Reduction Act (IRA), driving a surge in clean energy initiatives across the nation.
- JPMorgan’s tax equity financing will support Orsted’s Eleven Mile Solar Center in Coolidge, Arizona, a 600-megawatt solar and storage project, and the 250-megawatt Sparta Solar project in Mineral, Texas, leveraging tax credits extended under the IRA for storage systems and solar arrays.
- The IRA introduces provisions allowing for the transfer of tax credits to third parties, significantly expanding capital opportunities for clean energy projects and attracting corporations seeking to offset tax liabilities, propelling the tax equity market potential to exceed $100 billion annually by 2030, according to Evercore ISI estimates.
Orsted, a Danish renewable energy developer, secured a substantial $680 million investment from JPMorgan for two significant U.S. projects, marking a pivotal moment as the Biden Administration’s climate-focused legislation, the Inflation Reduction Act (IRA), stimulates a surge in clean energy endeavors across the nation. The investment from JPMorgan will primarily support Orsted’s Eleven Mile Solar Center, a massive 600-megawatt solar and storage project located near Coolidge, Arizona, and the 250-megawatt Sparta Solar project in Mineral, Texas. The Eleven Mile Solar Center, equipped with over 857,000 solar panels and 2,000 batteries from domestic manufacturers First Solar and Fluence, respectively, along with tracking systems from Nextracker, qualifies for a one-time investment tax credit for the storage system and an annual credit from a production tax credit for the solar array, both extended under the IRA. These credits are pivotal in incentivizing clean energy projects, typically facilitated through tax equity partnerships where financial institutions provide funding in exchange for tax credits, aiding developers in monetizing their credits. The IRA introduced a provision enabling the transfer of these credits to third parties, thereby broadening the pool of potential capital from corporations seeking to offset tax liabilities. This move significantly expands opportunities for smaller developers and increases the appetite of large financial institutions to invest in renewable energy projects. Preceding the IRA, the tax equity market was valued at $18 billion to $20 billion annually, a figure deemed insufficient by industry experts. However, post-IRA, the market for tax credit transfers is anticipated to reach $47 billion in 2024 and surpass $100 billion annually by 2030, according to estimates by Evercore ISI. Melissa Peterson, head of onshore and origination at Orsted, highlighted the significance of this development, emphasizing its potential to attract more corporates and companies with tax liabilities to support clean energy initiatives. Orsted’s Eleven Mile Solar project, expected to power approximately 65,000 homes once operational later this year, will predominantly supply power to a new Meta Platforms data center under construction nearby, with the remaining power sold to Salt River Project, the local utility. This investment comes at a crucial time, as data center electricity consumption is projected to triple between 2022 and 2030, further driving demand for clean energy sources. Peterson underscored the immense opportunities presented by the growing demand from reshoring manufacturing, tech giants, and ambitious corporates with climate targets, coupled with legislative support like the IRA, positioning the U.S. as a prime landscape for renewable energy development.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/05/23/denmarks-orsted-wins-680-million-jpmorgan-backing-for-solar-projects.html
