Plus Power LLC completed a $1.8 billion financing package for five large-scale stand-alone energy storage projects under construction in Arizona and Texas in a landmark series of transactions, the developer and its backers said Oct. 17.

"To me, this announcement is the water going back before the tidal wave," Plus Power CEO and Executive Chairman Brandon Keefe said in an interview. "Plus is driving energy storage into the mainstream in the capital markets."

Amid a challenging high interest-rate environment, the fast-growing Houston-headquartered company closed financings with major lenders and investors to bring online 1.04 GW/2.76 GWh of lithium-ion battery capacity before peak power demand returns to Texas and the Southwest next summer.

"These 11 top-tier financing institutions chose to provide capital to Plus Power, to our projects because of the climate impacts and because of the projects' durable, diversified returns," Keefe said. "We're starting to really see both our customers on the utility side as well as grid operators ask us to build bigger and faster because we're demonstrating how successfully energy storage can solve grid problems."

Among the transactions was a $707 million financing for the 250-MW/1,000-MWh Sierra Estrella Battery Storage Project in Avondale, Ariz., west of Phoenix, touted as the single largest such project financing to date. It included $202 million of tax equity from Bank of America Corp. and $505 million in construction, term loan and credit letter deals.

Omer Farooq, head of sustainable asset finance within Bank of America's Global Sustainable Finance Group, deemed the support a "breakthrough transaction," the kind of which "this industry needs to continue growing."

Plus Power also secured $196 million in construction, term loan and credit letter financings for the 90-MW/360-MWh Superstition Battery Storage Project in Gilbert, Ariz.

The Sierra Estrella and Superstition arrays rely on Tesla Inc.'s utility-scale Megapack systems and are underpinned by 20-year energy storage services agreements with Salt River Project, a public utility that is seeking to secure at least an additional 1,500 MW of battery power capacity by 2035, not including the two Plus Power projects, to support growing demand for electricity in the Phoenix area.

Norddeutsche Landesbank and Société Générale were the coordinating lead arrangers while Mizuho, U.S. Bank, Bank of America, CoBank and Siemens Financial Services Inc. were joint lead arrangers for the Arizona projects.

'Unique hedging opportunity' in Texas

Plus Power also completed $884 million in construction, term and tax equity financings for a trio of new stand-alone energy storage stations in the primary Texas wholesale power market, operated by the Electric Reliability Council of Texas Inc.

Those include the 300-MW/600-MWh Rodeo Ranch Battery Storage in Reeves County, which is providing a portion of its output to the commodities group at Goldman Sachs Group Inc. under an agreement that is "first of its kind," Keefe said.

The agreement is "a unique hedging opportunity," Ed Emerson, head of global commodities at the investment bank, said in a statement.

The Rodeo Ranch project, on which ground was broken in December 2022, is on track to come online in November, illustrating Plus Power's ability to add capacity quickly in markets struggling to keep up with rising demand for electricity, according to Keefe.

"You're seeing substantial capacity additions that are getting added to the grid where they're most needed and we're able to stand these things up rapidly," the CEO said. "This gives me hope that we can actually make a real dent in climate change."

Plus Power also secured construction and term financings for the 200-MW/400-MWh Ebony Battery Storage Project in Comal County and the 200-MW/400-MWh Anemoi Battery Storage Plant in Hidalgo County, both of which are fully merchant battery plants.

All three of the projects in Texas rely on technology from energy storage integrator Sungrow Power Supply Co. Ltd., based in China.

Deutsche Bank and First Citizens Bank were the coordinating lead arrangers, with First Citizens Bank as the administrative agent and Siemens Financial Services Inc. as the joint lead arranger for the Texas projects.

Inflation Reduction Act adds 'velocity'

The projects in Texas and Arizona are among nine Plus Power stand-alone battery storage systems under construction in five states, according to Keefe.

Although the development of those projects was underway before President Joe Biden enacted the Inflation Reduction Act in August 2022, the landmark climate law, which included a new 30% investment tax credit for stand-alone storage, sparked a new "velocity," Keefe added.

"What this has enabled us to do is more projects in more places simultaneously," Keefe said. "This is our first really big wave, but there's a lot more behind it."

The developer has 10 GW of energy storage working through transmission interconnection queues in over half of US states and in Canada, Keefe said.

Sectorwide, more than 100 GW of new energy storage additions, not including pumped hydroelectric storage, are planned to enter commercial operation in the US between 2023 and 2027, according to S&P Global Market Intelligence data. That compares with about 12 GW of cumulative US nonhydro storage capacity online as of September.

In converting their pipelines into firm projects, developers remain largely reliant on imports, especially from China. Plus Power is hopeful that a stronger domestic battery storage supply chain will emerge over the next few years as manufacturers seek to take advantage of Inflation Reduction Act tax incentives to build US factories.

But that could take some time.

"If someone could guarantee me supply of [US-made] batteries starting in 2025, I'd sign an order for 10 GWh today," the Plus Power CEO said. "As far as I can tell, it doesn't exist yet."

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