US battery storage developer Key Capture Energy (KCE) has begun commercial operations for two 100MW battery energy storage system (BESS) projects in Texas.
Announced 7 January, the projects are located in Denton and Grimes counties. KCE sold the investment tax credits (ITCs) for both projects to a third party, marking the company’s second ITC transfer transaction announcement under the Inflation Reduction Act (IRA).
KCE previously sold ITCs for BESS projects KCE TX 19 and KCE TX 21 in Williamson County, Texas, totalling 100MW and the 20MW KCE NY 6 located in Erie County, New York in 2023.
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.
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Likewise, IPP Ormat Technologies monetised the credit it received for the 80MW/320MWh Bottleneck BESS in California by selling the ITC for which the project was eligible, covering 40% of the project’s capital expenditure.
For the announced Texas projects, Investment bank CRC-IB served as financial advisor to KCE, which was represented in the deal by law firm Clifford Chance US LLP. Trek Capital Partners served as financial advisor to the buyer, who was represented by international law firm Akin LLP.
CRC-IB also served as KCE’s financial advisor in the company’s first ITC sale.
KCE also recently announced that the Long Island Power Authority (LIPA) approved two large-scale BESS projects in Long Island: the 50MW/200MWh Shoreham BESS and the 79MW/316MWh King BESS.
ITCs also exist in neighbouring Canada, allowing for creative financing deals. Developer Boralex and its partner Six Nations of the Grand River Development Corporation (SNGRDC) recently closed a US$372.2 million financing for a 300MW/1,200MWh BESS. Part of the funding structure was US$99 million to be repaid when ITCs are received for the project.
