Project Development and Finance
Subscribe to Project Development and Finance's Posts

Buttigieg Confirmation Signals Increased Investment in Renewable Energy Infrastructure and Electric Vehicles

Today, Pete Buttigieg was sworn in as secretary of transportation after his nomination passed the US Senate 86-13. His confirmation means a likely boon for investment in US infrastructure, particularly for those investing in renewable energy infrastructure, electric vehicle infrastructure and electric vehicles. In an email distributed to his staff today, he advised them that “…we will break new ground: in ensuring that our economy recovers and rebuilds, in rising to the climate challenge and in making sure transportation is an engine for equity in this country.”

US President Joe Biden has made similar pledges about infrastructure. Last week he signed an Executive Order that took bold steps to combat the climate crisis both at home and throughout the world, creating a number of opportunities for developers, lenders and investors in the renewable energy space.

Buttigieg’s confirmation is noteworthy since it is another concrete step by the Biden-Harris administration to implement its climate change agenda. For instance, the Biden-Harris administration has committed to replacing all government cars and trucks, including the fleet of United States Postal Service vehicles, with clean zero-emission electric vehicles. This would require replacing more than 645,000 vehicles, which reflects the most recent amount of government vehicles reported by the General Services Administration in 2019.

Buttigieg will now be responsible for overseeing the nation’s transportation system and creating safer roadways. The 86-13 vote signals that rebuilding the nation’s infrastructure will receive cross-party support. Buttigieg’s former experience as mayor of South Bend, Indiana, will likely aid him in impacting the local levels.




$40 Billion Available through Biden’s Department of Energy’s Loan Program Office for Innovative Technologies

With Democrats taking over the White House and the Senate, many eyes are on climate change and the role that the federal government can take to combat it. A variety of proposals have been floated about the best way for Congress to enact legislation to help in the fight against climate change, but certain actions can be taken immediately. One such action is to deploy $40 billion in loan capacity that was previously allocated to the Department of Energy as part of the 2009 stimulus package. This money is already available to the Department of Energy’s Loan Program Office (the LPO”) to spend at any time as a loan or a loan guarantee for qualified projects.

Any new loans would follow $30 billion of loans and loan guarantees previously provided by the LPO under these same programs (most notably under the Obama administration and one large loan associated with a nuclear reactor project under the Trump administration). Under the Biden administration, there is strong optimism that the unallocated funds may be more readily available for qualifying projects. The LPO, recognizing some of the challenges with government credit support programs, has taken steps to better engage interested parties, including providing no-commitment preconsultations to walk potential applicants through the process to ensure that the LPO and the project will each be prepared when the LPO application process begins in earnest. Additionally, in light of the innovative projects that exist in 2021, the LPO is examining the opportunities for offshore wind and the offshore wind value chain as well as looking at vehicle solutions that might qualify under the LPO’s programs.

The $40 billion in loan capacity, including $4.5 billion for renewables alone, is available for applicants seeking financing for innovative fossil energy projects, nuclear energy projects or renewable energy and energy efficiency projects; for fuel-efficient, advanced technology vehicle manufacturers; or for Tribal energy development projects.

To qualify for the renewable energy or energy efficiency loans or loan guarantees, under Title XVII of the Energy Policy Act of 2005, a project must meet all of the following requirements:

  • Employ new or significantly improved technologies as compared to commercial technologies in service in the United States at the time the guarantee is issued.
  • Avoid, reduce or sequester anthropogenic emissions of greenhouse gases.
  • Be located in the United States (foreign ownership or sponsorship of the projects is permissible as long as the projects are located in one of the 50 states, the District of Columbia or a US territory).
  • Provide a reasonable prospect of repayment.

Interested applicants should be aware that the timeline for LPO loan origination is typically longer than in the commercial financing market—roughly 90 days should be added to a typical project financing timeline for the LPO to diligence program eligibility and obtain internal approvals. However, for innovative projects that meet the other LPO eligibility requirements, the loans or loan guarantees available through the LPO may be a viable option. For instance, for offshore wind projects, long-duration energy storage, green [...]

Continue Reading




IRS Provides Relief for Offshore Wind and Federal Land Projects

New guidance from the Internal Revenue Service (IRS) extends the Continuity Safe Harbor to 10 years for both offshore wind projects and projects on federal land. The relatively quick release of this guidance following enactment of the offshore wind investment tax credit (ITC) last week suggests strong support for these projects by Congress, the US Department of the Treasury and IRS.

Access the article.




COVID-19 Stimulus Bill Includes Key Renewable Energy Tax Credits

The US stimulus bill passed into law yesterday includes several key extensions and additions to the tax credits available for renewable energy. The bill had been agreed to by Congress early last week and was signed into law by the president last night.

Access the full article here.




Five Takeaways: Utility Acquisition of Renewable Projects – A Discussion of the Legal and Tax Issues Regarding Utilities, Developers and Tax Equity

Increasingly, utilities are replacing older generation fleets with more cost-effective generation technologies. Renewables are cost-competitive alternatives in this effort for a number of reasons, including the current tax incentives. A utility’s acquisition of a renewable asset presents many issues not otherwise present in a non-utility acquisition, particularly if the utility intends to include its investment in rate base.

In our webinar, we discussed the legal and tax issues associated with renewable energy transactions based on our experience representing both utilities and developers.


Below are key takeaways from this week’s webinar:

  1. 2021 will bring an increase for the renewable energy industry, despite the effect COVID-19 has had on the market.
  2. Some issues to consider when creating a tax equity structure that involves a utility are: regulatory investment limitations, related party and normalization considerations.
  3. Utility build-transfer agreements should be executed well in advance of the notice to proceed. These agreements usually involve classic mergers & acquisitions (M&A) representations and warranties that are made in advance of the project beginning.
  4. Developers under a build-transfer agreement should consider ways to mitigate risk.
  5. Timeline is important. A utility will commonly use the interim period between entering into a build-transfer agreement and closing the transaction, to complete tax equity documents and make certain representations and warranties to the tax equity investor.

To begin receiving Energy updates, including invitations to the webinar series, please click here.

Access past webinars in this series.




Seeing Beyond the Wall of Capital

In the United States, despite the continued spread of COVID-19 and the uneven approach to reopening, where that is even occurring, deals in the renewable energy sector are happening.

In a recent article for Project Finance International, Chris Gladbach and Seth Doughty discussed the state of the US market for renewable power projects, including how investments (and investment styles) have changed, new technologies and more.

Access the article.

Republished with permission from Refinitiv Project Finance International.




Six Takeaways from Wind Turbine Vendor Update: A Conversation with GE Renewable Energy


McDermott hosted GE Renewable Energy North America Services Sales Leader Ben Stafford, Commercial Director of Onshore Wind for the North Region Rob Bienick and Commercial Director of Onshore Wind for the West Region Matt Lynch on July 30 for a discussion about COVID-19’s impact to turbine supply chain and construction, the effects of the Production Tax Credit (PTC) safe harbor extension, and how GE is preparing for 2021 and beyond.

Below are key takeaways from this week’s webinar.

1. COVID-19 continues to impact both supply chain and construction – requiring more communication with customers, subcontractors, and within GE, but products continue to be manufactured, delivered, installed, and maintained.

2. The large wind project pipeline in the United States (even prior to the PTC extension) shows that there remains great optimism for the wind industry, despite the current PTC phase-out schedule.

3. The repowering market for wind is growing, providing many benefits including renewed PTCs, increased energy yield, increased reliability, lowered maintenance cost, and optimization of existing site infrastructure over greenfield development.

4. The trend toward longer blades continues, but logistics remain the largest hurdle to wider deployment.

5. Service agreements are trending towards longer terms with greater flexibility to meet customer needs, including opportunities to align interests with revenue and risk sharing terms.

6. GE is available to support both new and repowering projects with available safe-harbor equipment.

To begin receiving Energy updates, including invitations to the webinar series, please click here.

Access past webinars in this series.




New York Announces One of the World’s Largest Procurements for Offshore Wind and Onshore Renewable Energy Projects.

On July 21, 2020, New York Governor Andrew Cuomo announced the largest combined clean energy solicitation ever issued in the United States, seeking up to 4 GW of renewable capacity. This capacity is broken up into 2500 MW of offshore wind and 1500 MW of onshore large-scale renewable energy projects.

Access the full article.




Key Takeaways: Achieving Low-Cost Decarbonization Through Power Markets, Infrastructure and Grid Operations



McDermott hosted Rob Gramlich, Founder and President of Grid Strategies, LLC, on July 16 for a discussion of low-cost decarbonization strategies for the electricity sector. We framed the discussion around 2020 US Presidential Candidate Joe Biden’s recently announced goal of getting to zero carbon emissions from the electricity grid by 2035.

Here are three takeaways from our conversation:

1. Three Areas of Change. Rob highlighted three areas where improvements can be made to substantially increase the deployment of wind and solar resources: Power markets, grid infrastructure and grid operations. With respect to power markets, Rob emphasized that regional transmission organizations (RTOs) can play a bigger role in achieving very fast dispatch over large geographic areas. With respect to infrastructure, he emphasized that new transmission lines will be required to reach the best wind and solar resources, but also that many of those new lines can be built on existing rights-of-way. And with respect to grid operations, he emphasized that there are technologies and operating practices that can help us improve the efficiency of the grid.

2. Flexible FERC. Rob suggested that under a new Democratic administration, FERC would likely prioritize flexibility in pricing design and in FERC’s interactions with states. He emphasized the importance of a flexible design for the pricing of “capacity” services and suggested that a Biden administration would likely be supportive of state level efforts to promote renewable energy.

3. Transmission Costs vs. Electricity Costs. Rob suggested that over the next ten years transmission costs will become a greater share of the overall cost of electricity, but that building out transmission would help bring that overall cost down.




Six Takeaways: Utilization and Structuring for Section 45Q Carbon Capture Credits

On Thursday, June 11, McDermott partners Phil Tingle, Heather Cooper and Jacob Hollinger were joined by Ken Ditzel, managing director at FTI Consulting, to discuss their insights into the proposed Section 45Q carbon capture and sequestration credit regulations.


The Treasury Department and IRS recently published proposed regulations implementing the Section 45Q carbon capture and sequestration credit. The regulations clarify some questions about the credit, though many questions remain. For further discussion, see our On The Subject.

Below are six key takeaways from this week’s webinar:

      1. Carbon capture projects are likely to be economically important moving forward. Ken Ditzel estimated there are more than 600 economically viable projects, including both secure geological storage at deep saline formations and enhanced oil recovery projects.
      2. The proposed regulations provide a compliance pathway for satisfying the reporting requirements. For long-term storage, taxpayers should comply with Subpart RR of the Clean Air Act’s greenhouse gas reporting rule. For enhanced oil recovery projects, taxpayers may choose either Subpart RR or alternative standards developed by the American National Standards Institute (ANSI).
      3. Taxpayers can claim the credit if they utilize the captured carbon for a purpose for which a commercial market exists, instead of storing it. Additional guidance is needed to determine what commercial markets the IRS will recognize and how they will go about making those determinations.
      4. The proposed regulations offer considerable flexibility to contract with third parties to dispose the captured carbon and to pass the section 45Q credit to the disposing party. Contracts must meet certain procedural requirements, including commercially reasonable terms and not limiting damages to a specified amount.
      5. If the captured carbon dioxide leaks, the carbon capture tax credit is subject to recapture by the IRS. The taxpayer who claimed the credit bears the recapture liability, but IRS guidance permits indemnities and insurance for credit recapture.
      6. The partnership allocation revenue procedure issued in February 2020 provides flexibility for the section 45Q credit relative to other tax equity structures, by only requiring 50% non-contingent contributions by an investor member. This may make projects easier to finance, especially in light of the other contracting flexibility in the proposed regulations.

Download the key takeaways here.

To begin receiving Energy updates, including invitations to the Renewables Roundtable and Q&A Webinar Series, please click here.

To access past webinars, please click here.




STAY CONNECTED

TOPICS

ARCHIVES