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US DoE loan to finance ‘up to 80% cost’ of zinc battery player Eos’ US$500 million expansion

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Zinc battery storage company Eos Energy Enterprises has received positive news from the US Department of Energy (DOE) regarding a US$398.6 million loan.

The startup designs and manufactures energy storage systems using a zinc hybrid cathode chemistry and based on stackable 3-hour duration units to create durable and flexible long-duration energy storage (LDES).

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It has been given a conditional commitment from the DOE’s Loan Programs Office (LPO) for the loan guarantee, the two parties announced yesterday. That comes after Eos responded to a call from the LPO for applicants and reaching the due diligence stage in the process in September 2022.

The company said the funding would be used towards its plans to scale up manufacturing capacity at its site in Pittsburgh, Pennsylvania. Eos’ annual production capacity stands at 800MWh and original scale-up plans targeted reaching 3GWh in the coming years.

However, under its latest plan dubbed Project AMAZE, which (sort of) stands for ‘American Made Zinc Manufacturing’, the loan would support an expansion instead to 8GWh annual production capacity by 2026, and comprise 80% of an expected total investment requirement of US$500 million.

Eos’ newest iteration of its technology, the Z3 battery, comes after 15 years of development and the company claimed that its Znyth module use only earth-abundant materials and is suitable for mass production at low-cost.

Placing its manufacturing and supply chain in the US since 2018 after initial production in China, Eos expects to avail of advanced manufacturing direct pay tax credit incentives for domestic manufacturing.

These have been introduced with the Inflation Reduction Act (IRA) legislation. While there have been some concerns raised across the industry about some of the complexity and ambiguity in tax office guidance around how tax credits will work, they are part of the reason so many new investments into the US supply chain and manufacturing have been seen already across industries including solar PV, electric vehicles (EVs) and of course battery storage.

‘Appealing investment,’ investment bank Evercore says

On hearing the news of the loan offer, which is still subject to Eos reaching required milestones and “certain technical, legal and financial conditions” being satisfied, investment banking group Evercore said the company is “an appealing investment in the energy storage space”.

This, it said in a note, was due to in part to its commitment to US supply chain and ability to get the domestic production adders, which apply both for its production as production tax credits (PTC) and to its customers in the form of investment tax credits (ITC). ITCs and PTCs of US$35/kWh capacity of battery cells and US$10/kWh of battery modules, equivalent to 10% of costs could be claimed, Evercore highlighted.

The investment bank also noted Eos’ anticipation of a “robust growth trajectory” and its rolling out of the Z3 next generation batteries, as well as the boost to its manufacturing plans that Project AMAZE and the LPO loan represented.

Eos CFO Nathan Kroeker meanwhile claimed the addressable global market for LDES products is a “nearly 200GWh opportunity”.

That said, Eos is among a number of energy storage-focused companies which have publicly listed in the last two or three years through mergers with special purpose acquisition companies (SPACs) and as recent analysis from this site noted, investors in several of the most prominent have yet to see an upside.

Eos, Energy Vault, Stem and ESS Inc have each seen their share price fall by an average of 80%. However, tailwinds such as the IRA incentives in the US and boost in demand for energy storage globally mean their long-term prospects may be much stronger, the Energy-Storage.news Premium article noted.

Eos CEO Joe Mastrangelo recently also responded strongly to a short-seller note which had claimed one of the company’s biggest customers to date was itself in choppy waters. Mastrangelo said Eos believed a “number of” projects contracted for with customer Bridgelink under a 240MWh master supply agreement (MSA) would “ultimately be built”.

LPO and its role in the US

The Loan Programs Office (LPO) meanwhile was revived in the early days of the Biden presidency after lying dormant in the Trump years.

LPO chief Jigar Shah was interviewed earlier this year for our quarterly journal PV Tech Power (Vol.34), saying its multi-billion remit to support projects and technologies of promise was a clear sign of the US’ now much more “aggressive” stance on taking action on the climate crisis.

Other energy storage-related companies to received similar offers to Eos include a provisional US$850 million loan guarantee to battery and energy storage system (ESS) manufacturer KORE Power and ongoing negotiations with thermal energy storage company Nostromo Energy for a US$176 million loan.

Battery recycling and resources companies Li-Cycle and Redwood Materials are also in the frame for US$375 million and US$2 billion loans respectively.

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.

22 October 2024
New York, USA
Returning for its 11th edition, Solar and Storage Finance USA Summit remains the annual event where decision-makers at the forefront of solar and storage projects across the United States and capital converge. Featuring the most active solar and storage transactors, join us for a packed two-days of deal-making, learning and networking.

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