Goldman Sachs Ignites Energy Storage Gold Rush

The ink has barely dried on the Inflation Reduction Act of 2022, and at least one of the world’s top investment firms has already leveraged the law’s new tax credit for energy storage. That would be Goldman Sachs, which seems determined to ignore the rising hullabaloo over “woke capitalism” in favor of making bank off the sparkling green economy of the future.

A New Tax Credit For Energy Storage

Federal tax credits for solar and wind development have played an essential role in kickstarting the domestic renewable energy industry. Energy storage is another key element in the clean power revolution, but up until now the tax situation has not reflected the ability of standalone energy storage systems to accelerate wind and solar development.

The Inflation Reduction Act of 2022 changed all that. The new law is a watered-down version of President Biden’s signature “Build Back Better” climate action bill. However, it still packs a powerful decarbonization punch and the new energy storage tax credit is part of the reason why.

As described by our friends over at the National Law Review, Section 48c of the IRA provides for a tax credit of up to 30% for property used in a “qualifying advanced energy project,” as certified by the US Department of Energy.

Energy storage systems come under the IRA’s expanded definition of “qualifying,” along with a long list of other things. For all the juicy details go visit NLR.

Goldman Sachs Seizes Energy Storage Opportunity

Goldman Sachs, for one, was quick to catch on to the new opportunity. Earlier this morning the US inverter supplier EPC Power Corp. announced that Goldman Sachs Asset Management has hooked up with Cleanhill Partners to stake an undisclosed sum in its end-to-end power conversion business model (undisclosed as of this writing, that is).

“The strategic investment, along with a comprehensive recapitalization, positions EPC Power to expand and deliver against rapid growth in the renewable energy storage markets while helping facilitate the U.S. economy’s clean energy transition,” EPC enthuses.

EPC also gives credit where credit is due.

“The transaction closely follows the signing into law of the Inflation Reduction Act of 2022, which among other provisions extends a first-ever tax credit to stand-alone energy storage, creating a significant financial incentive for adopting EPC Power’s inverters and other technologies,” they added.

EPC Power bills itself as “the only U.S.-based, end-to-end power conversion solution provider, making its technology well-suited for grid-scale applications that require added layers of security.”

“EPC Power’s smart inverters are uniquely suited for applications in standalone energy storage, solar energy storage and data center backup power,” the company explains.

“Going beyond the role of traditional inverters to feed power into the grid, ‘smart’ inverters are powered by advanced software and work dynamically with the grid to increase resilience, reliability, safety and security,” they add.

Cleanhill Partners Also Piles Onto Energy Storage Pile

The hookup with Goldman also affirms Cleanhill’s prior financial stake. In addition to an underwriting role, Cleanhill — a private equity firm focusing on decarbonization — has also been guiding EPC on operational and strategic matters since last year.

The bet on the energy storage field is a good one. EPC cites BloombergNEF’s 2021 Global Energy Storage Outlook, which projects that the global stock of energy storage installations will multiply 20 times by the end of the decade, using 2020 as a starting year.

Here in the US, the Biden administration is putting a premium on made-in-America tools for the clean power transition, which gives EPC an extra advantage. The California-based company already has its first manufacturing facility up and running in San Diego County, and plans are under way to get a second facility online later this year, somewhere on the East Coast.

If you can guess where that might be, drop us a note in the comment thread. We’re thinking somewhere in the northeast, where the offshore wind power industry is about to kick into high gear. Right across the pond lies Europe, where policy makers are scrambling for alternatives to Russian gas. Although EU electrical systems don’t always jive with US standards, EPC notes that its inverters are certified to European standards and grid codes, as well as those of the US and Australia.

You Do You, Goldman Sachs

The US clean tech industry reached juggernaut status long before President Biden put his John Hancock to the Inflation Reduction Act, and the EPC news is just the beginning of a fresh torrent of investment.

A number of Republican policy makers have tried to stem the tide by evoking the “woke capitalism” canard. In their view, the ESG (environmental, social, governance) investing trend unfairly discriminates against fossil energy companies, among others.

It’s more than a rhetorical device. Last year, legislators in Texas passed a new law that forbids public pension funds from doing business with financial firms that are found to discriminate against fossil energy companies, as determined by the state Comptroller.

The anti-ESG movement is currently focusing attention on the top asset management firm BlackRock, but other companies are already next on the woke watchlist, including Goldman Sachs.

On its part, Goldman does not seem to have gotten the memo. When the EPC deal was announced, Alexander Mass, managing director of Goldman Sachs Asset Management, emphasized Goldman’s ongoing interest in the clean tech field.

“EPC Power is uniquely positioned to play a critical role in the evolution of the U.S. solar and energy storage value chains and is now well capitalized to continue its trajectory of rapid growth,” said Mass. “As the only scaled supplier of smart inverters that are designed, engineered and 100% manufactured in the U.S., EPC Power is a natural continuation of our thematic investment activity in this space, in partnership with Cleanhill Partners and EPC management.”

“GSAM [Goldman Sachs Asset Management] has over 40 individuals focused full time on ESG and impact investing, including a centralized ESG strategy team and dedicated investment professionals within portfolio management teams,” Goldman also explains on its website.

Then there’s this missive from GSAM, issued last February:

“Goldman Sachs Asset Management today announced the launch of the Goldman Sachs Bloomberg Clean Energy Equity ETF (“GCLN” or the “Fund”). The new Fund offers access to the $100 Trillion+, multi-decade clean energy investment opportunity1 by seeking to track the Bloomberg Goldman Sachs Global Clean Energy Index (the “Index”), an equity index designed by Goldman Sachs Asset Management and Bloomberg energy sector specialists.”

Woke, indeed. Game on.

Follow me on Twitter @TinaMCasey.

Photo: Inverters for energy storage courtesy of EPC Power.


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