Ormat Technologies Inc. has launched commercial operation of its Lower Rio energy storage facility in Texas. This battery system, with a capacity of 60 megawatts and 120 megawatt-hours, will provide energy and ancillary services under a seven-year tolling contract. It marks the company’s first such agreement in the Texas market.
A hybrid tax equity partnership with Morgan Stanley
Alongside the facility’s commissioning, Ormat finalised a hybrid tax equity partnership with Morgan Stanley Renewables Inc. This financial structure enables the company to monetise a 40% Investment Tax Credit (ITC) granted to the Lower Rio project. The transaction generated approximately $25.0mn (EUR23.3mn), contributing to Ormat’s target of realising $160mn (EUR149mn) in tax benefits in 2025.
The hybrid model allows Ormat to combine equity financing with tax benefits while retaining operational control of the asset. This approach aligns with the company’s broader strategy to diversify revenue streams, complementing its established geothermal business.
Expanding storage capacity in the United States
With the addition of the Lower Rio plant, Ormat’s total energy storage capacity in the United States now stands at 350MW/778MWh. This expansion is part of a wider plan to strengthen the company’s footprint in regional markets with high demand.
Texas, facing increasing volatility in its power grid, is a strategic market for storage operators. Ormat’s facility is designed to address demand peaks while supporting grid stability.
Profitability goals in the storage segment
The seven-year tolling contract secures Ormat fixed and predictable revenues. Such agreements provide financial stability by limiting exposure to wholesale power market fluctuations.
Doron Blachar, Chief Executive Officer of Ormat Technologies, stated that the project fits within a broader strategy to grow the storage segment, with a focus on improving profitability and reducing risk in targeted markets.
