Orsted secures $680M JPMorgan support for Danish solar projects
TL/DR –
Orsted, a Danish renewable energy developer, has received a $680 million investment from JPMorgan for two US projects. The funding, facilitated by tax equity financing, will go towards the Eleven Mile Solar Center in Arizona and the Sparta Solar project in Texas. The Inflation Reduction Act, a key component of the Biden Administration’s climate law, has spurred a clean energy boom in the US, allowing these projects to qualify for a one-time investment tax credit for the storage system and an annual credit from a production tax credit for the solar array.
Orsted Secures $680 Million Investment from JPMorgan for US Renewable Energy Projects
Danish renewable energy developer Orsted secured a $680 million investment from JPMorgan for two US solar projects. This investment was made possible by incentives from the Biden Administration’s Inflation Reduction Act (IRA), triggering a clean energy boom in the US.
JPMorgan will offer tax equity financing for Orsted’s Eleven Mile Solar Center and the Sparta Solar project. The former, located near Coolidge, Arizona, is a 600-megawatt solar and storage project while the latter is a 250-megawatt project based in Mineral, Texas.
Eleven Mile Solar features over 857,000 solar panels and 2,000 batteries supplied by local manufacturers First Solar and Fluence, respectively. The project also incorporates tracking systems from Nextracker. Thanks to the IRA, the project is eligible for a one-off investment tax credit for the storage system and an annual credit from a production tax credit for the solar array.
These tax equity partnerships, allowing large institutions to finance renewable energy projects in return for tax credits, have been vital for clean energy projects. However, the IRA has significantly expanded potential capital by allowing credits to be transferred to third parties. This enables corporations seeking to offset their tax bills to join the fray.
Before the IRA, the tax equity market was valued between $18 billion and $20 billion annually according to the American Council on Renewable Energy. However, Evercore ISI posits that with the IRA, the market for tax credit transfers could reach $47 billion in 2024, even exceeding $100 billion per annum by 2030.
Increased Demand for Renewable Energy Projects
According to Melissa Peterson, head of onshore and origination at Orsted, the IRA creates new opportunities for corporations with tax obligations in the US to support clean energy projects. This innovative structure could be reproduced in future projects.
Construction at the $1 billion Eleven Mile Solar site commenced in January 2023, with operations expected later this year. The project will provide power to approximately 65,000 homes, with two-thirds of the power allocated for a new Meta Platforms data center nearby. Boston Consulting Group predicts that between 2022 and 2030, data center electricity consumption will triple, equating to the power usage of 40 million households by the decade’s end.
“This is probably the best time as a renewable energy developer to be working in the US,” commented Peterson. “We see tons of opportunity with increasing demand from reshoring manufacturing, big tech companies, plus the Inflation Reduction Act and ambitious climate targets from various corporates.”
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