There have been a number of recent legislative proposals that could drastically impact the US energy industry, including renewables. In this Legal Update, my Mayer Brown colleagues and I describe some of the highlights.
Energy Tax Implications of New Infrastructure and Tax Plans
On March 31, 2021, the Biden administration released the American Jobs Plan (the “Infrastructure Plan”), which is a proposal that, if ultimately enacted, aims to modernize outdated infrastructure, create additional jobs and increase the United States’ global competitiveness. Alongside the Infrastructure Plan, the Biden administration released a Made in America Tax Plan (the “Tax Plan”),
GREEN Act of 2021
House Ways and Means Committee Democrats introduced the Growing Renewable Energy and Efficiency Now (GREEN) Act of 2021 on February 5, 2021. The bill is an updated version of a similar bill of the same name introduced in June of 2020.
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Covid-19 Relief Legislation to Have Extenders for Renewables
Last night, Congressional leaders announced an agreement on a $900 billion COVID relief bill. While the text of the bill has not been released as of this writing, people familiar with the negotiations have indicated that the deal will extend renewable energy tax credits for wind and solar projects and the Section 45Q carbon capture
COVID-19: CARES Act Fails to Address Renewable Energy Industry’s Concerns But Path Forward with the IRS Remains
Please click here to read our latest client alert, which discusses some of the tax-related concerns that the renewable energy is facing due the COVID-19.
Senator Paul Requests Changes to the IRS’ “Beginning of Construction” Guidance for PTCs
In a letter dated May 8, 2018, Senator Rand Paul (R-Ky.), in support of his state’s coal industry, urges the U.S. Department of Treasury (“Treasury”) to make significant changes to the existing “beginning of construction” guidance issued by the Internal Revenue Service (“IRS”) in a series of notices (“IRS Notices”). The IRS Notices include industry-friendly
Financing Wind New York Soundbites
On May 30, A Word About Wind held its first annual Financing Wind New York conference. Tickets to the conference sold out and the attendees were generally wind pros with considerable experience. The panelists provided many useful insights regarding the wind industry.
Below are soundbites from the conference. They are organized by topic, rather than chronologically, and were prepared without the benefit of a transcript or a recording.
Offshore Wind
“Right now, globally there is 18 GW of offshore wind.” — North American Leader, European Based Offshore Wind Developer
“Expecting 20 to 30 GW of offshore wind by 2030. So that means a couple of gigawatts a year of offshore wind.” — North American Leader, European Based Offshore Wind Developer
“Offshore wind can be very close to the load centers, 20 to 30 miles away from where people are actually using the electricity. That makes offshore wind easier than onshore wind, which is now facing transmission challenges to get their power to where people actually use it.” — North American Leader, European Based Offshore Wind Developer
“The European model has been to have the local utility build out to the offshore wind. In the US, the trend appears to be wind generators are responsible for getting their wind to shore. I expect wind developers will end up paying for the grid connection. There is a discrete set of permitting and risks building that connection 30 miles out in the water to the project.” – President, Transmission Developer
“Energy is politically driven, so having manufacturing facilities set up here in the US is very important.” — North American Leader, European Based Offshore Wind Developer
“Energy policy is very much driven by the states. However, the federal government under Trump has been supportive of offshore wind. The Trump administration has taken on board streamlining the offshore wind permitting process and has been supportive of new offshore wind leases.” — North American Leader, European Based Offshore Wind Developer
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Tax Reform Interview with Stratton Report
The Stratton Report has published an interview with me that discusses the pending tax reform legislation: http://strattonreport.com/longforms/davidburtonmayerbrown/.
Solar Industry Magazine Publishes – A Decade of Evolution In U.S. Project Financing
The full text of the article is below or it is available at Solar Industry Magazine:
The solar industry has undergone a tremendous evolution in the course of the last decade. Below we outline some of the more notable developments, with a focus on project financing in the U.S.
In 2007, the largest solar photovoltaic project in the world was an 11 MW project in Portugal, called Serpa, that cost EUR 58 million to build. Today, the largest solar PV project in the world is Tengger Desert Solar Park in China and is 1,500 MW, or more than 100 times the capacity of Serpa, and the cost of building a solar project is a fraction of what it was a decade ago.
In 2007, manufacturers of thin-film solar and manufacturers of crystalline silicon solar were battling to see which would be the predominant technology. Today, there are more manufacturers of crystalline modules than thin film and more projects using crystalline modules than thin film; however, First Solar appears to have found success with rigid thin-film modules.
In 2007, terms like “resi,” “C&I,” “DG” and “community solar,” which are now ubiquitous in our industry, were unknown to most energy financiers.
Continue Reading Solar Industry Magazine Publishes – A Decade of Evolution In U.S. Project Financing
Solar Power International 2017 Soundbites
Below are soundbites from panel discussions at Solar Power International in Las Vegas on September 11 and 12. The soundbites are organized by topic, rather than in chronological order, and were prepared without the benefit of a transcript or recording.
The topics covered are: Tax Reform • Tax Equity Volume and Investor Mix • Tax Equity Structuring • Deficit Restoration Obligation Structuring and Senior Secured Debt in Partnership Flips • FMV Valuation Issues and Insurance • Community Solar • Community Choice Aggregators • Power Purchase Agreements • Residential and Community Solar Markets • State Policy • Department of Defense Procurement
Tax Reform
ITC has already gone through tax reform and already has a transition rule in place. These arguments resonate pretty well with Republicans. — SEIA, Gov’t Relations
Anyone who tells you where we are now in this tax reform debate, is lying to you. — Boutique Investment Manager
Low likelihood of comprehensive tax reform in 2017. Chances for a tax cut are pretty good. Indemnification for a tax rate cut is built into these transactions. — Boutique Investment Manager
We are using a 25% corporate tax rate in most deals. The specifics depend on allocation of risk [of change in tax law] and [the financial strength of] the counterparty. We are more likely to put in less capital now and contribute more later if there is not a tax rate cut. — Commercial Bank, Head of Business Development Energy Investing
Not one size fits all. We use a 35% tax rate for 2017 and a lower rate for 2018 and beyond. In our deals, for federal tax rates we use between 25 and 30% [for 2018 and later]. If rate reduction doesn’t occur, we then fund more. It frightened me when Paul Ryan said he was aiming for a 22.5% tax rate. [This was before the Republican Big 6 released their proposal with a 20% corporate tax rate.] — Money Center Bank, Managing Director
We have very flexible solutions in place now to address tax rate reduction risk in deals. It is not the headache it was six months ago. — Boutique Accounting Firm, Director
Since corporations generally pay less than 35% in federal taxes now, and $1 of tax credit is $1 of tax credit, it remains to be seen what a lower rate really means [for the solar tax equity market]. — Boutique Investment Manager
The potential change in tax rate means the potential for a cash sweep, which means sponsors can raise less back leverage. — Commercial Bank, Head of Business Development Energy Investing.
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