Adam Schurle and Morten Lund Discuss ITC Tax Equity Transactions for Energy Storage Projects

Foley & Lardner LLP Partner Adam Schurle and Of Counsel Morten Lund are quoted in the Energy Storage News article, “US energy storage industry grapples complexity, cost of ITC tax equity transactions,” discussing innerworkings of the investment tax credit (ITC) for standalone energy storage.

The ITC came into effect at the beginning of 2023, offering significant potential reduction in the capital cost of investing in eligible energy storage equipment. Yet tax equity transactions are often more complicated and expensive than simply raising project debt. Lund explained that transaction costs for a typical tax equity financing “frequently exceed” $1 million, and that even a “simplified and streamlined transaction” can incur costs above $250,000.

Schurle and Lund said that many major U.S. companies do not have or are not focus on the “sophisticated level of tax planning” required for structuring a tax equity deal. Complex tax structures are usually needed to monetize non-transferrable ITCs. Schurle and Lund noted the exclusion of a simpler direct pay or cash benefit option from the ITC scheme but noted that the federal government has a “long history of choosing tax credits over cash benefits.”

“This is broadly true across a number of industries,” Lund added.