Denmark's Orsted wins $680 million JPMorgan backing for U.S. solar and battery projects

Aerial view of Eleven Mile Solar in Coolidge, Az. Photo: Van Applegate

Danish renewable energy developer Orsted won a $680 million investment from JPMorgan in two U.S. projects as incentives from the Biden Administration's signature climate law — the Inflation Reduction Act (IRA) — spur a clean energy boom in the U.S.

JPMorgan will provide tax equity financing for Orsted's Eleven Mile Solar Center, a 600-megawatt solar and storage project near Coolidge, Arizona, and the 250-megawatt Sparta Solar project in Mineral, Texas.

Eleven Mile Solar, which includes more than 857,000 solar panels and 2,000 batteries from domestic manufacturers First Solar and Fluence, respectively, as well as tracking systems from Nextracker, qualifies for a one-time investment tax credit for the storage system, as well as an annual credit from a production tax credit for the solar array. Both credits were extended under the IRA.

Clean energy projects have relied on tax equity partnerships for years. Put simply, large financial institutions provide part of the financing for a renewable energy project, in exchange for the project's tax credits. Developers themselves rarely have high enough tax bills, so a partnership allows them to monetize their credits.

[video_shortcode_iframe src="https://player.cnbc.com/p/gZWlPC/cnbc_global?playertype=synd&byGuid=7000341103" itemprop="image" content="https://player.cnbc.com/p/gZWlPC/cnbc_global?playertype=synd&byGuid=7000341103" data-src="https://player.cnbc.com/p/gZWlPC/cnbc_global?playertype=synd&byGuid=7000341103"]

But the partnerships are complex and the markets are limited. Smaller developers don't always have the means to enter into these partnerships, and the appetite from large financial institutions to take stakes in renewable energy projects is limited.

The IRA sought to change that by adding in a provision allowing the credits to be transferred to a third party, creating a new pool of potential capital from corporations looking to offset tax bills. The project developer can either sell the credits themselves, or the tax equity partner — in this case JPMorgan — can decide to sell the credits to another party.

Prior to the IRA, the tax equity market was between $18 billion and $20 billion per year, according to the American Council on Renewable Energy. That's "[s]till far short of what is needed in the post-IRA clean energy investment landscape," the investment bank Evercore ISI noted. The bank estimates the potential market for tax credit transfers hitting $47 billion in 2024, and rising to more than $100 billion annually by 2030.

Aerial view of Eleven Mile Solar in Coolidge, Az. Photo: Van Applegate

"This is the first time we've been able to do something like this...and it really opens the doors for a lot more corporates and companies with tax liability in the United States to come in and help support clean energy projects," Melissa Peterson, head of onshore and origination at Orsted, told CNBC. "It's really a unique structure that we hope to replicate over and over again."

Construction at the $1 billion Eleven Mile Solar site began in January 2023 and, once operational later this year, it will be able to power roughly 65,000 homes. Two-thirds of the power will be used for a new Meta Platforms data center under construction nearby. Orsted is selling the power to Salt River Project — the local utility — who's then selling it to Meta.

Boston Consulting Group estimates that between 2022 and 2030 data center electricity consumption will more than triple, requiring the same amount of power as 40 million households by the end of the decade. This comes on top of load growth from increased use of electricity, meaning U.S. power demand is now growing significantly for the first time in decades.

"We've been working in the United States for over 10 years, and this is probably the best time as a renewable energy developer to be working here in the U.S.," said Orsted's Peterson. "We see tons of opportunity with the increasing demand we're seeing from reshoring manufacturing, big tech companies, paired with things like the Inflation Reduction Act, paired with lots of corporates who have ambitious climate targets."

"We really see this as the pinnacle of opportunity for us," she added.

- CNBC's Harriet Taylor and Van Applegate contributed reporting.

OTHER NEWS

23 minutes ago

Postecoglou lures A-League double act to join Tottenham staff

23 minutes ago

Princesses Beatrice and Eugenie 'could be a real asset' as King reconsiders slimmed-down monarchy

23 minutes ago

2025 Volkswagen Golf R: Hot hatch gets hotter

23 minutes ago

Future of Laybuy unknown after company placed into receivership

23 minutes ago

Melbourne star Christian Petracca says season-ending King's Birthday injuries 'the most traumatic thing I've experienced'

23 minutes ago

Volkswagen dropping $5bn into struggling EV maker Rivian

23 minutes ago

Gary Neville says England substitute 'must start' Euro 2024 last-16 tie

23 minutes ago

KF-21 Fighter: KAI Signs $1.41 Billion Deal To Start Production Of South Korean Air Force Next-Gen Jet

23 minutes ago

Celine Dion’s sweet friendship with Aussie music legend John Farnham

23 minutes ago

Ramnaresh Sarwan predicts mass exodus of West Indies players to the US

23 minutes ago

Jeremy Renner felt his skull crack in hellish snowplough accident

24 minutes ago

A US$100 billion bet on China’s economy sours as warehouses empty

24 minutes ago

India's Rahul Gandhi appointed as parliamentary leader of opposition

27 minutes ago

America's largest outdoor mineral springs resort is coming to Houston

30 minutes ago

Katie Holmes receives award in Italy in stunning off-white gown

30 minutes ago

Hearing on removal of Jack Smith from Trump case concludes

30 minutes ago

Titans' Rashad Weaver: 'It's time to take a leap' in Year 4

30 minutes ago

Woman Has Internet Hooked With Daily Vlogs as Moulin Rouge Dancer

30 minutes ago

China rover returns historic samples from far side of the moon — and they may contain secrets to Earth's deep past

30 minutes ago

2024 Volkswagen Golf R brings power boost and new tech

30 minutes ago

Julian Assange Pleads Guilty to Espionage, Securing His Freedom

30 minutes ago

Estimated declaration times of General Election results: Alphabetical list

30 minutes ago

Farage called out over comments

30 minutes ago

£1.4bn worth of PPE from single firm was destroyed or written off

30 minutes ago

Lol: Woman drank alcohol from her handbag at fancy restaurant, Mzansi laughs

30 minutes ago

Woman Not 'Satisfied' With Carpet Job—Then Cleaner Shared the Before Photo

34 minutes ago

Jacksonville approves $1.4B renovation of Jaguars stadium

34 minutes ago

Guatemala appeals court revokes judge's order to give house arrest to renowned journalist José Rubén Zamora

34 minutes ago

Suspected Yemen Houthi attack targets vessel in waters farther away than many previous assaults

34 minutes ago

Guatemalan appeals court revokes order to grant house arrest to journalist José Rubén Zamora

35 minutes ago

Valley View tornado survivor continues to heal after suffering broken ribs, a punctured lung and blood clot

36 minutes ago

Canada beats Peru 1-0 for first ever Copa America win

36 minutes ago

Woman found shot to death in Illinois farm field finally identified after nearly 50 years

36 minutes ago

Kenya Moore Breaks Her Silence After ‘RHOA’ Season 16 Exit

36 minutes ago

A skydiving accident left him a double amputee. Now he’s a snowboarding champion

39 minutes ago

Video: Michael Phelps says false doping accusations eroded 'a lifetime of mental health growth' - and now regulators turning a blind eye to accusations of China doing just that

39 minutes ago

Video: Nigel Farage makes thinly veiled swipe after being booed by crowd as he wins best news presenter at the TRIC Awards

40 minutes ago

Newly sworn-in ANC MP Zizi Kodwa: State’s case against me is ‘nonexistent’

40 minutes ago

John 5 Responds to Accusations of Guitar Miming With Motley Crue

40 minutes ago

Despite political uncertainty, Cape Town's office rental market thrives