Ørsted secures $680m investment from J.P. Morgan for solar and storage projects

Ørsted, a leader in the clean energy sector, has announced a significant $680 million tax equity financing from J.P. Morgan. This investment will support a substantial portfolio of solar and energy storage assets in Texas and Arizona, marking one of the largest solar and storage tax equity transactions since the Inflation Reduction Act (IRA) was enacted in August 2022.

Strategic Expansion in Solar and Storage

The financed projects include the Eleven Mile Solar Center, a dual 300 MW solar and 1200 MWh storage project in Pinal County, Arizona, and the Sparta Solar project, a 250 MW solar initiative in Mineral, Texas. This investment not only enhances Ørsted‘s capacity in renewable energy but also significantly expands its footprint in the U.S. renewable sector.

Leveraging New Tax Equity Structures

This deal utilizes a novel financial structure combining both production tax credit (PTC) and investment tax credit (ITC) mechanisms, tailored by the recent Inflation Reduction Act. Specifically, the Eleven Mile Solar Center will benefit from a one-time investment tax credit for its storage systems, while its solar operations will earn production tax credits across a decade, optimizing the financial returns from these green investments.

Tax Credit Transferability and Market Impact

James Giamarino, Chief Commercial Officer for the Americas at Ørsted, highlighted the strategic implications of the new tax credit transfer options enabled by the IRA, stating, “With this new market unlocked by the IRA, we’re excited to continue our tax equity partnership with J.P. Morgan and bring on new entities looking to advance the U.S. renewable energy industry, support job growth, and promote local economic development.” This mechanism allows corporations to purchase tax credits, providing them an avenue to support clean energy projects while optimizing their tax situations.

Project Details and Local Benefits

The combined projects are set to add 550 MW of solar capacity and 300 MW of battery energy storage to Ørsted’s portfolio. Both are slated to commence commercial operations in 2024. The Sparta Solar project is part of the larger Helena Energy Center, a pioneering 518 MW wind and solar co-location in Bee County — Ørsted’s first such project in the U.S. Meanwhile, the Eleven Mile Solar Center represents Ørsted’s inaugural venture into Arizona. Collectively, these projects are expected to generate approximately $125 million in local tax revenue over their operational lifespan, significantly benefiting public services in their respective communities.

Legal Framework and Future Outlook

Legal counsel for the projects was provided by Latham & Watkins LLP for Ørsted and Milbank LLP for J.P. Morgan, ensuring compliance and strategic advisement throughout the financing process. By the end of 2024, Ørsted anticipates having a total of 2 GW of solar power operational across the United States, underlining its commitment to expanding renewable energy solutions domestically and globally.