Green channel for energy storage project loans

Does project finance apply to energy storage projects?

The general principles of project finance that apply to the financing of solar and wind projects also apply to energy storage projects. Since the majority of solar projects currently under construction include a storage system, lenders in the project finance markets are willing to finance the construction and cashflows of an energy storage project.

Will a tax credit be available for energy storage projects?

However, with the passage of the Inflation Reduction Act of 2022, tax credits are now available for standalone energy storage systems, and thus lenders may be willing to provide bridge capital that is underwritten based on the receipt of proceeds from an anticipated tax equity investment, similar to renewable energy projects.

How do Chinese companies finance renewables projects?

Most of the funding is raised domestically. A high percentage comes from state-owned banks and national development finance institutions. Chinese companies favor debt financing as lending rates have been kept at low levels to boost the economy, and renewables projects can access preferential rates.

Are solar and wind projects a good investment?

These projects will have long-term predictable revenue streams. In addition, lenders may be willing to finance merchant cashflows, but with less leverage and subject to detailed market studies and cash sweeps. These trends for solar and wind projects also apply to energy storage projects.

Can the IRA help the private sector invest in energy transition assets?

While the American Jobs Plan and the CHIPS Act both contain extensive funding for energy transition assets, it is the IRA that most clearly unleashes the private sector to freely direct investment that can qualify for after-the-fact incentives.

How do financial and capital markets shape the energy transition?

Financial and capital markets may be part of shaping the energy transition as they respond to government policy, but it is the realities of the energy transition that have created a vector along which governments are competing for economic preeminence.