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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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Pratt’s Energy Law Report has published our article 2018 and Onward: The Impact of Tax Reform on the Renewable Energy Market. We are pleased to be able to make a PDF version of the article available.  (The article starts on page 6 of the PDF).

A Word About Wind has published our article What Is the Impact of Tax Reform on US Wind Tax Equity Deals? in its blog (subscription required) and newsletter.  If you are unable to open the blog post, the text of the article is available below:

On 22 December 2017, President Trump signed the first major reform of the United States tax code since 1986. Here are some of the ramifications of the reforms on wind tax equity transactions.

Corporate Tax Rate Reduced to 21%

In 2018, the corporate tax rate has been reduced from 35% to 21%. The rate reduction means that US corporations will pay significantly less federal income tax, so the supply of tax equity will decline. However, most tax equity investors are expected to still pay enough tax to merit making tax equity investments.

Importantly, the rate reduction means sponsors of wind projects will be able to raise less tax equity as depreciation deductions are worth only $.21 per dollar of deduction rather than $.35 per dollar.

100% Bonus Depreciation

A partial mitigant to tax rate reduction is that the act provides the option of claiming 100% bonus depreciation (i.e. expensing), so depreciation deductions can be available in the first year (rather than over multiple years). However, the partnership tax accounting rules hamper the efficient use of 100% bonus depreciation.…
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Today, the House voted 227 to 303 in favor of the tax reform bill agreed to by the conference committee.  No Democrats voted for the House bill, and 12 Republicans from high tax states voted against it.  The Senate is expected to vote later this evening to approve it; it is possible that the president could sign the bill as early as tomorrow.

The enacted legislation is expected to be identical to the bill approved by the conference committee.  Our analysis of the conference committee’s bill’s impact on the renewable energy market is below, which is followed by a chart that summarizes the relevant provisions in each of the three bills.…
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The US tax reform bill that the Senate passed on December 2, 2017—along partisan lines in a 51 to 49 vote—is a mixed bag for the tax equity market. The bill is now headed to the conference committee, consisting of House of Representative and Senate leaders, to be reconciled with the tax reform bill passed by the House on November 16.

Below we describe the five differences from the House bill that are of greatest significance to the renewable energy tax equity market. (See also our prior analysis of the ramifications for the tax equity market of the House bill.)

Amounts of and Eligibility for Tax Credits

First, the amount of renewable energy tax credits available and the rules for qualifying for those credits are unchanged from current law under the Senate bill. Specifically, the inflation adjustment that applies to production tax credits is left in place and the “start of construction” rules are unchanged. The fact that the Senate bill left these provision alone is positive for wind and solar, which are in the midst of a phase-out, for wind, and a phase-down, for solar.

However, the Senate bill also left alone the lapsed tax credits for the “orphaned” renewable energy technologies that were inadvertently omitted from the 2015 extension that benefited wind and solar. The orphaned renewable energy technologies are fuel cells, geothermal, biomass, combined heat and power, landfill gas, small wind, solar illumination, tidal power and incremental hydroelectric.

Proponents of those technologies may have more negative views of the Senate bill. There is still discussion of the tax credits for the orphaned technologies being included in an “extenders bill” to possibly be taken up after the tax reform process is over.…
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Our article Proposed GOP Tax Reform Would Curtail Tax Incentives for Wind and Solar is available from North American WindPower (no subscription required).  The article includes a discussion of the politics of the Senate passing tax reform and a discussion of market implications; however, the discussion of the specific changes to the Internal Revenue Code…

On Thursday, November 2, Republicans in the US House of Representatives released their proposed tax reform legislation, providing for massive alterations to tax law. The proposed legislation would trim tax benefits applicable to the wind and solar industries, while broadening the scope of the application of the “orphaned” energy tax credit. Further, it would eliminate the tax credit for electric vehicles starting in 2018. The proposed legislation is subject to further amendments and may not be enacted into final legislation.

Continuity of Construction. Pursuant to current law, the production tax credit (PTC) and investment tax credit (ITC) phase out over time, with the level of credit for which a renewable energy project qualifies being based on when the project began construction relative to various deadlines that determine the level of PTC or ITC. Under the proposed legislation, for any renewable energy project to qualify for a specific level of PTC or ITC, there would need to be continuous construction on such project from the deadline for the specific PTC or ITC level through the date the project is placed in service.

The concept of continuous construction does not exist in the current PTC and ITC provisions of the Tax Code. It was adopted by the IRS as an administrative matter in Notice 2013-29. However, the IRS later, under Notice 2016-31, created a safe harbor to enable projects to avoid application of the IRS’s “continuity” requirement. To qualify for the safe harbor, a project must be placed in service within four calendar years after the end of the calendar year in which construction began. The proposed legislation would effectively codify the continuity requirement and eliminate the safe harbor. Further, these changes appear to apply to all projects that have not been placed in service as of the date of enactment of the proposed legislation, regardless of whether construction of such projects began before enactment.…
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