SMT Energy and SUSI secure tax equity investment for 100MW ERCOT projects


Developers SMT Energy and SUSI Partners have secured a tax equity financing agreement for 100MW of battery storage projects in Texas with ‘specialised tax equity’ investor Greenprint Capital.

The financing (amount undisclosed) covers ten battery energy storage system (BESS) projects in South Texas which are all expected to start commercial operation in the coming months.

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They have been developed through a joint venture (JV) between developer SMT and infrastructure investor SUSI, with SMT managing construction and overseeing commercial operations as a minority investor since SUSI acquired a majority stake in 2022.

Standalone energy storage projects in the US only became eligible for tax equity financing this year, when the Inflation Reduction Act (IRA) extended the investment tax credit (ITC) to standalone storage.

The act also brought in several new provision to the ITC. Alongside its baseline coverage of a project’s capex of 30%, 10% uplifts to that are now available if the project has a minimum portion of US-made components as well as if it is located in an ‘Energy Community’, regions defined by historical reliance on fossil fuel industries.

SMT said the majority of the projects in the portfolio qualify for the higher ITC rate by being in an Energy Community.

It is not Greenprint’s first tax equity investment in standalone energy storage. In June, reported on a US$10.8 million tax equity commitment it provided for a project by developer Nexus Renewables for a project in California. SMT described it as a specialised tax equity investor in its announcement.

However, tax equity investment has to-date largely been the domain of specialised tax equity investors because of the complicated investment structures that need to be created for it, limiting the pool of capital for renewables, as explained in a recent interview with lawyer Mona Dajani of Shearman & Sterling, an expert in the topic.

Dajani talked through new transferability and ‘direct pay’ provisions which aim to make it easier for investors with deep tax equity expertise to provide that type of financing for clean energy projects.

Projects in Texas, where ERCOT operates the grid, which are 9.9MW or under have a faster interconnection process. The announcement didn’t specify but most projects in ERCOT, particularly 9.9MW ones, have a two-hour duration, partially related to recent rule changes requiring a minimum charge of one hour at full power to participate in some ancillary services.

Our publisher Solar Media is hosting the 10th Solar and Storage Finance USA conference, 7-8 November 2023 at the New Yorker Hotel, New York. Topics ranging from the Inflation Reduction Act to optimising asset revenues, the financing landscape in 2023 and much more will be discussed. See the official site for more details.

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