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Thanks to the Inflation Reduction Act (IRA), clean energy deals are still getting done- and big ones, at that- shining a spotlight on an increasingly important, albeit still unanswered question: Will the White House decide to keep former President Biden’s landmark legislation intact?
Last week, New York-based DSD Renewables closed on a $140 million tax equity investment from Morgan Stanley Renewables, structured to utilize the IRA’s new tax credit transferability provisions. Two days later, Catalyze, a fully integrated developer and Independent Power Producer (IPP) of distributed renewable energy assets headquartered in Houston, Texas, announced a $400 million multiyear debt facility from ATLAS SP Partners, the warehouse finance and securitized products business majority owned by Apollo funds. In late February, another distributed energy developer in New York, Aspen Power, secured more than $200 million in new financing from a variety of lenders and investors including Carlyle, MUFG, and BMO.
THE DSD DEAL
Morgan Stanley’s investment into DSD will support power purchase agreements (PPAs) and community solar projects in markets across the Northeast, as well as in California and Illinois.
The deal marks a significant milestone for DSD, which is set to transfer tax credits to corporate buyers for the first time. Morgan Stanley Renewables has announced that it will retain a portion of the credits itself. The tax equity transaction is among the first to leverage new financial tools to support distributed generation (DG) assets.
“These kinds of transactions further demonstrate the positive impact the IRA has had on renewable energy financing,” noted Hannah McGovern, vice president of structured finance at DSD. “The ability to transfer tax credits has created a more accessible tax equity market for solar project investment, helping accelerate the adoption of clean energy solutions across the country. While the structure of these deals will continue to evolve, we expect to see more of these transactions close in the near future.”
Since 2019, DSD has raised more than $2 billion in project capital and developed and deployed over 1,000 megawatts (MW) of solar and storage projects across the United States. In November of 2023, DSD announced a $250 million strategic investment from Cox Enterprises. Earlier in the same year, the company secured $75 million in tax equity financing from Bank of America to fund commercial and industrial (C&I), community solar, and storage projects across California, Connecticut, Illinois, New Jersey, New York, Massachusetts, Minnesota, Pennsylvania, and Washington D.C.
CATALYZE’S DEBT FACILITY
Catalyze’s $400 million multiyear debt facility will support the construction and aggregation of the company’s growing portfolio of C&I, community solar, and battery storage projects. It is designed to provide Catalyze with room to grow while streamlining future financing.
The deal is similar to a recent one between Convergent Energy and Power and Mitsubishi and another announced by fellow community solar developer Pivot Energy. In the latter, First Citizens Bank provides Pivot with a $450 million debt warehouse that supplies the flexibility needed to continually pump out new projects.
“It’s very sustainable for us to build our business on,” Pivot’s chief financial officer Bret Labadie explained previously to Factor This.
Catalyze’s project portfolio currently consists of about 300 MW in operation and construction and another 1 gigawatt (GW)+ of additional investment opportunity.
“This facility is a critical milestone for Catalyze in our strategy to scale distributed renewable energy solutions for businesses and communities across the United States and will enable us to double in size by the end of the year,” shared Jared Haines, CEO of Catalyze. “ATLAS’ deep expertise in the distributed generation sector made them an ideal partner. We look forward to building on our partnership to help meet the increasing demand for renewable energy solutions.”
ASPEN’S NEW POWER
On February 19, leading DG platform Aspen Power announced multiple new financings to support its expansion across the U.S., an additional investment from Carlyle, building on the firm’s initial funding in 2022. Aspen Power also secured a new $142 million construction-to-term credit facility with MUFG to fund its 2025 project pipeline and a $50 million revolving credit facility with BMO, replacing its prior financing arrangement with Lombard Odier Asset Management Corp.
“This additional investment from Carlyle, facility from BMO, and financing from MUFG provide Aspen Power with the support and capital to accelerate renewable energy projects that deliver economic and environmental value for communities and stakeholders,” said Jorge Vargas, CEO of Aspen Power.
Aspen will leverage these funds to accelerate the development of high-impact projects across its community solar, commercial and industrial (C&I), multifamily, and small-scale utility portfolios.
Aspen says its new facility with BMO enhances its ability to invest in project development, optimize its existing pipeline, and bring more clean energy solutions to businesses and communities nationwide.
“We are proud to support Aspen Power with a development facility that will provide energy solutions for communities and businesses across the country,” said Carrie Cook, Global Head of Investment and Corporate Banking at BMO.
WILL THE IRA LIVE OR DIE?
Last week, 21 House Republicans signed a letter addressed to Republicans on the House Ways and Means Committee advocating to keep IRA clean energy tax credits in place.
“Don’t just think you can repeal these things and have our support,” Rep. Andrew Garbarino (R-NY), who organized the letter, told POLITICO. “We need the projects that are currently under development to be brought online so we can continue the President’s ‘America First’ agenda. These (credits) are helping the president accomplish what he said he wanted to do in his campaign, and that was to make America an energy-dominant country.”
Those Republican signatories to the letter likely have a good reason to keep the IRA and its tax credits around: red states and districts are benefitting from them the most. A report released last year by the national nonpartisan business organization E2 indicates Southeast states and Republican congressional districts are seeing the most return from the legislation. About 60% of all IRA-related clean economy projects – and 85% of total private-sector investments announced at the time of the report – have gone to Republican congressional districts, despite the fact that no Republican member of Congress voted in favor of the IRA. 19 of the top 20 congressional districts for clean energy investments are held by Republicans.
Last summer, the U.S. Department of the Treasury released data from the IRS and an analysis by the Office of Economic Policy demonstrating that more than 3.4 million American families benefitted from $8.4 billion in Inflation Reduction Act tax credits in 2023 alone.
Shortly after his inauguration, President Trump halted the disbursement of all funding provided by the IRA and the Infrastructure Investment and Jobs Act (IIJA), policies he calls the “Green New Scam.” He also cleared the way for drilling on federal lands to combat an “energy emergency” blamed on the previous administration, halted leasing and permitting for offshore wind projects, and restarted the process of withdrawing the U.S. from the Paris Agreement, a legally binding international treaty combatting climate change.
