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Eolian claims first use of Inflation Reduction Act standalone ITC for 200MW battery storage projects

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Energy storage developer Eolian has completed an investment in two standalone battery energy storage projects in Texas, which it claims is the first use of the Inflation Reduction Act’s new tax credit incentives (ITC).

Eolian has closed a tax equity investment in the Madero and Ignacio battery storage projects in the city of Mission, Texas, which together total 100MW of nameplate power each and will come online later in 2023. Numerous reports peg their energy storage capacity at 214.5MWh each, or 429MWh in total.

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Tax equity investment is a investment structure used to achieve a return based on US federal income tax benefits derived from said investment. Eolian claimed this deal is the first use of the investment tax credit (ITC) for standalone energy storage which came into effect on January 1 as part of the Inflation Reduction Act.

The tax equity investment for the two projects was provided by a fund managed by Churchill Stateside Group, which primarily does real estate financing.

The two battery storage projects are located on the same site and will provide grid reslience in the Rio Grande Valley through trading in the energy market run by Texas’ main grid operator ERCOT.

Alongside being the first use of the new (ITC) Eolian also claimed that together the two projects will constitute the largest “fully-merchant” battery storage projects in the world by energy capacity when they go online.

Typical applications for battery storage in Texas’ ERCOT wholesale electricity market include frequency response services which have historically been a big chunk of battery storage projects’ revenues in the state, regulation reserve service (RRS) and a sub-set within that group called fast frequency response (RRS-FFR).

Eolian’s CEO Aaron Zubaty commented: “This energy storage project is the largest of its kind in the world, represents hundreds of millions of dollars in direct investment by private investors, and solves the problem of meeting demand during hours of high uncertainty that require highly dynamic units that can turn on remotely and instantaneously to keep the lights on. The new face of grid resilience is fast and flexible energy storage to fill the gaps when other resources are too slow or too fragile to meet the challenge.”

The investor was advised by Norton Rose Fulbright LLP for the deal while Churchill Stateside Group was was advised by Husch Blackwell LLP.

ERCOT currently has around 2.7GW of battery storage online at last count, second only to California’s 4.6GW (both figures as of end-2022).

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