‘Hard to make investment decisions’: MN8 Energy on the US energy storage market

Ji was involved in a discussion about the impacts of 2024 on market prospects, economics and deployment of energy storage.

She notes of the discussion:

“The most important takeaway is the undeniable need and demand for batteries. In the current market, with tremendous renewable growth and intermittency issues, you really need batteries to shift energy around. This is an unprecedented load growth time that hasn’t happened in decades.”

MN8 originated within Goldman Sachs Asset Management as Goldman Sachs Renewable Power in 2017. In 2022, it transitioned into a standalone company named MN8, with approximately 100 employees transferring to the new organisation.

In the same year, the company purchased a stake in the 200MW Mount Signal 2 solar project in California.

MN8 operates across multiple segments, including commercial and industrial (C&I), grid-scale solar and BESS and EV charging solutions.

Currently, the company claims to have around 4GW of solar PV projects operational or under construction and 1.1GWh of energy storage projects across 875 project sites in 28 US states.

Ji says of MN8:

“We’re an independent power producer (IPP), and one advantage is we’re cash flow positive. Many IPPs or renewable companies aren’t self-sustained. We have a strong operational record, and being cash flow positive gives us confidence to sustain through turbulent times.”

She continues, “we’re very selective and strategic in investments, running our own in-house analysis rather than just following market consultant reports.”

Sustaining through turbulent times will be important for MN8 and others as the energy storage industry continues to navigate unknowns around the Inflation Reduction Act (IRA) and shifting tariff policies.

The US and China recently announced a 90-day pause on tariffs, making the effective tariff on BESS approximately 60%.

While this is certainly more favourable than a 145% tariff, it does not end import uncertainty.

In addition, the US House Ways and Means Committee recently submitted the budget reconciliation bill, which aims to reduce government spending.

Among other proposals, the bill would lower the investment tax credit (ITC) to 6% by 2030, phase out the Production Tax Credit (PTC) entirely after 2031 and put an early end to the 45X Advanced Manufacturing and Clean Hydrogen Tax Credits.

House Ways and Means also suggested blocking access to clean energy incentives that use components, technology, materials, licensing, or royalties from ‘prohibited foreign entities’.

Ji notes that Chinese battery suppliers price their products to compete with US suppliers such as Tesla.

“Even if you try to ramp up domestic production, it takes years to build. The market will continue to have both US-built and international batteries.”

“At the energy summit, they showed US-based production prices at US$180-250 per kWh versus Chinese manufacturers at US$110-150 per kWh with 10-35% tariffs,” Ji continues.

“Even with ITCs and the 10% domestic content addition, Chinese products are still a better deal. Of course, with 100-125% tariffs, it’s different, but in normal cases, Chinese manufacturers maintain competitive advantages.”

With these production prices per kWh and adding a 60% tariff, even the highest estimate of Chinese manufacturer pricing still falls below the highest estimate of US manufacturer pricing.

With that in mind, it may seem like the best option for companies to purchase Chinese-manufactured BESS right now, while the pause is active, but there is no certainty that this will be the safest bet.

After the pause, the tariffs could be drastically reduced, eliminated completely, or reach even higher levels than before.

Ultimately, Ji believes things will work out well for the energy storage industry, but current factors are leading to indecision.

“One data point shared at the Bloomberg United Finance Summit is that last year, 69% of batteries sold in the US were manufactured in China.”

“Comparing to the solar industry, we are still heavily relying on Chinese-made batteries. These ongoing situations have people putting things on hold a bit. Eventually, things will shake out fine, but right now there’s a lot of noise, making it hard to make investment decisions.”

A similar sentiment was recently shared by Daniel Finn-Foley, director of energy storage market intelligence for advisors Clean Energy Associates (CEA), on LinkedIn, saying:

“The tariff pause is not a starting gun – it’s a false start. No one wants to be the chump who imported from China at 30% when, for all we know, the rate may be 0% in three months. Likewise, no one wants to be the sucker who didn’t import at 30% when the rate jumps to 54% or more in three months, or sooner. The result? Paralysis.”

The MN8 head of structuring believes that a full repeal of the IRA is unlikely to occur because of how solar and wind-related ITCs and PTCs have historically been supported bipartisanly.

Red states have benefited from renewables because they have the land needed to support such projects, bringing jobs and other benefits to local communities.

Additionally, doing away with the IRA does not completely doom energy storage project development.

As Ji notes:

“Batteries were getting built even before the IRA existed. The standalone battery ITC is new from the IRA.”

Ji remains hopeful that domestic manufacturing will increase, saying:

“My guess is maybe eventually you’ll need to reach certain domestic content levels to get a basic ITC – that’s one way to incentivise domestic production and manufacturing jobs. That’s what this administration is trying to do.”

Another factor that Ji brings up is the replacement of gas and coal plants in the face of a growing load demand from data centres.

“Even if the unimaginable happens and we lose ITC completely, solar and storage aren’t going anywhere. Our grid demand isn’t just policy-driven – we have ageing coal and gas fleets that need replacement, plus load growth from hyperscalers and data centres with environmental commitments.”

A December 2024 report from the US Department of Energy (DOE) found that:

“Data centres consumed about 4.4% of total US electricity in 2023 and are expected to consume approximately 6.7 to 12% of total US electricity by 2028. The report indicates that total data centre electricity usage climbed from 58 TWh in 2014 to 176 TWh in 2023 and estimates an increase between 325 to 580 TWh by 2028.”

While many data centre developers opt to build on-site renewable energy, many more use fossil-fuel technologies.

The Trump administration has also championed expanding AI and fossil fuels.

With more complications in developing renewable energy technologies and eased restrictions on fossil fuels, the idea of data centres and renewables, like BESS, growing together seems further away. Additionally, data centres prioritise their own energy needs.

Ji says of these issues:

“Regarding the administration’s fossil fuel support – Democrats are more pro-renewable and environmental issues, but for the last decade, people understand we need all-of-the-above solutions.”

“You can’t sustain the grid with just renewable and battery – you have intermittency issues. Look at Germany – moving too fast can cause issues if things aren’t well planned.”

Ji continues:

“The Environmental Protection Agency (EPA) easing environmental requirements on coal and gas has led utilities to delay coal and gas retirements. The real challenge is the interconnection queue – mostly solar and storage assets, but it’s so backlogged you can’t get projects built for five to seven years.”

“Meanwhile, we want to lead in AI innovation and data centres, which need generation capacity. Gas turbine orders are backlogged into 2029 and beyond.”

Because of these backlogs in the interconnection queue, Ji explains that gas and coal will naturally be running for longer, which she says is needed for reliability, but can also help to bridge the gap for renewables.

Ji explains two points from the panel, the first being that using surplus interconnection service for gas peakers, peak demand in Texas can be met by adding BESS without having to build new interconnection.

The second point is making loads more flexible. Ji cites a Duke University study showing that making load 0.5-1% more flexible in Texas could enable another 15GW of load without new generation.

Ji and MN8 maintain that despite the industry’s current challenges, energy storage will continue to grow. She says of MN8:

“We’re staying strong and planting seeds for long-term growth. We’re working with hyperscalers and partners on 24/7 clean energy solutions, which doesn’t exist yet but everyone’s working toward.”