UK-headquartered BESS investor Gore Street Energy Storage Fund (GSF) and financial services firm Morningstar have provided updates outlining their views on US clean energy tax credits and their future.
Trump’s presidency brings uncertainty for clean energy support, including ITC
The beginning of Donald Trump’s second term as US president has brought a slew of changes and uncertainties surrounding clean energy industries. The president’s executive order on “Unleashing American Energy” announced plans to revoke an executive order on the “Implementation of the Energy and Infrastructure Provisions of the Inflation Reduction Act (IRA) of 2022.”
The implications of this order and the administration’s ability to change the IRA in part or in full are still not known. However, the decision and the continued review of both government agencies and funds which would benefit US cell procurement and manufacturing does indicate a less friendly if not hostile stance.
Due to these changes, the future of the investment tax credit (ITC) for clean energy and energy storage projects has been seen as perhaps less mutable but, nevertheless, uncertain. As of 2022, the IRA broadened access to ITCs to include standalone energy storage, whereas previously, only energy storage systems installed with and charging from solar PV systems were eligible.
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Additionally, before the IRA, ITCs could only be used by setting up complicated tax equity joint ventures to invest in the project. The IRA introduced a new way to sell ITCs through ‘transferability’ (Premium access article), allowing developers to sell ITCs associated with clean energy projects to another company in exchange for funds.
Gore Street Energy Storage Fund reports on investment tax credits and energised assets
In a recent press release, Gore Street Energy Storage Fund (GSF) said that the Trump administration has taken no action regarding ITCs.
The company also said that external legal counsel advised that there has been no change to the eligibility of its projects to qualify for ITCs, additionally stating that ITC applications will be filed as soon as possible.
The company is continuing to negotiate the sale of ITCs, reporting no change in market interest or pricing from “well-established” ITC buyers.
GSF has also announced the energisation of the 75MW/75MWh Dogfish BESS in Texas and the 57MW/57MWh Enderby BESS in GB (Great Britain). As reported in January, the company faced delays in energising the Enerby BESS located in GB. GSF says this was due to last-minute transformer inspection requirements from the National Grid Electricity Transmission (NGET).
System integrator Nidec was announced as engineering, procurement and construction (EPC) partner for the Dogfish BESS in December of 2023. Nidec has previously provided EPC services for Gore Street’s UK BESS projects Ferrymuir and Stony.
GSF says that all assets are scheduled to be revenue-generating in fiscal year Q1 (FYQ1) of the upcoming fiscal year (FY25/26). The non-GB assets now represent 61% of the total energised portfolio on a MW basis.
Morningstar gives word on EDPR shares and storage projects from National Grid
Meanwhile, financial services Morningstar has reported that renewables operator EDP Renewables’ (EDPR) shares have fallen by approximately 30% following the election of Donald Trump. Morningstar says the sector is undervalued and that tax credits, including ITCs, will be very hard to repeal.
“Existing tax credits cannot be repealed before their expiration, and pulling forward the expiration of the IRA tax credits for new projects before 2032 will require approval from Congress, which might prove challenging since most renewables’ projects are installed in red states,” the firm said in a note.
Continuing, “Our base case scenario is that the expiration will be pulled forward to 2027, but due to safe harboring, projects commissioned up to 2031 would still be entitled to tax credits as long as 5% of the projects’ investments have been spent in 2027.”
Within this news, EDPR was also compared to National Grid, which has agreed to sell its US onshore renewables and storage business to Brookfield Renewable Partners. The note added:
“National Grid’s agreement to sell its US onshore renewable business to Brookfield for $1.74 billion aligns with our GBX 970 fair value estimate and expectations. The deal reflects the current market dynamics, where US renewables companies like EDPR have faced excessive sell-offs.”
While these reports from Morningstar and GSF highlight the strength of the ITC, they also signify the struggle to navigate the current energy landscape in the US, with sweeping changes already being made within the industry and an unknown amount more to come.
About Gore Street and Morningstar
GSF originally only invested in projects in GB but expanded into international markets. In 2023, the company’s results for the first half of its financial year showed this strategy to be successful. The revenue/MW/hour in ERCOT for GSF was five times higher than GB.
This was the same year that market analytics firm Modo Energy recorded the lowest average revenue levels to date for UK BESS projects. The result of a heavily saturated BESS market and as the firm said, a continuation of frequency response revenues falling since the launch of the enduring auction capability, a mechanism designed to help deliver co-optimised procurement for the day-ahead frequency response and reserve products.
GSF is also using Germany-headquartered provider ACCURE’s cloud-based battery data analytics software in two projects in the UK. GSF says the predictive analytics solution is able to reduce operational issues and the risk of fires caused by thermal runaway events.
Morningstar was founded in Chicago, Illinois, US, and has offices around the world that cover hundreds of thousands of investments.
The firm has multiple clean energy and energy transition funds through which customers can invest and in 2024, it named Canadian asset manager Brookfield Renewable Partners as its top pick for investing in the US renewable energy space.
