The Energy Storage Report 2024

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Key Capture Energy sells investment tax credits for 120MW of New York and Texas BESS

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US battery storage developer Key Capture Energy has sold investment tax credits (ITCs) for battery energy storage system (BESS) projects in New York and Texas, using new transferability rules.

The transaction comprises a transfer of ITCs from two operating projects in Texas – KCE TX 19 and KCE TX 21 in Williamson County – totalling 100 MW and a project in New York, the 20MW KCE NY 6 in Erie County, pictured above. The deal was concluded with Enhanced Capital, an impact investment firm.

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The Inflation Reduction Act (IRA) introduced both the ITC for standalone energy storage as well as a new way to sell ITCs to other investors through so-called ‘transferability’. Before the IRA, ITCs could only be used by setting up complicated tax equity joint ventures to invest directly in the project.

Transferability enables developers to more straightforwardly sell the ITCs associated with a clean energy project to another company in exchange for funds immediately, with an online portal created to track every project to avoid duplication.

This in theory should open up the market to investors less familiar with tax equity, since the tax equity joint venture entities were costly and complicated to set up. That should mean more capital available for the clean energy sector.

Ed Rossier, Enhanced Capital’s managing director and head of climate finance, commented on the deal with Key Capture Energy (KCE): “Tax credit financing for large-scale energy storage projects supports a more reliable and resilient grid and facilitates broader adoption of renewable energy generation across our country.”

Recent ITC transfer deals for large-scale energy storage include two projects in California, owned by W Power and Wellhead Electric, and Arevon.

CRC-IB was financial advisor to KCE for the deal KCE was represented by Stoel Rives LLP and Enhanced Capital by Greenberg Traurig, LLP.

Jeff Bishop, co-founder and former CEO (as of December) of Key Capture, contributed to our Year in Review series of articles looking back on 2023 and ahead to 2024, published this week, also discussing the Midwest market in an earlier interview (Premium access).

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