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Five Takeaways: The Energy Market in 2021 – From Crisis to Opportunity

The energy market has undergone significant change in the past 12 months, with even more on the horizon. Our webinar series explores how these changes have shaped—and will continue to impact—the energy industry, including discussions of what’s to come.

Our latest webinar featured Greg Wetstone, president and CEO of the American Council on Renewable Energy (ACORE).


Below are key takeaways from this week’s webinar:

  • The renewable energy industry continued to grow throughout the Trump administration; 2020 was a banner year with 28.5 GW of new wind and solar (the previous record, in 2016, was just below 23 GW).
  • The renewable industry is likely to receive its first legislative action as part of the infrastructure bill (likely through the budget reconciliation process); however, it will likely not occur until after impeachment proceedings and a COVID-19 relief bill have been completed.
  • It is not clear that a clean energy standard could be passed through the budget-oriented reconciliation process or that carbon pricing would have sufficient votes to even pass the reconciliation process, so the best current option may be to continue and expand tax incentives for renewable energy.
  • The Biden administration has committed to a “whole of government” approach to clean energy, which is expected to include an aggressive Federal Energy Regulatory Commission (FERC) policy once a third commissioner is appointed in June; sweeping executive orders (some of which we have already seen); aggressive federal procurement targets; streamlined permitting; and broader Department of Energy guidance in innovation.
  • A refundable tax credit at 85% of the current value is very much on the table, but it remains to be seen whether there are sufficient votes in the Senate for this to make it through the reconciliation process.

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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.

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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.

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Five Takeaways: Early Moves and Current Trends in Energy Storage

McDermott continues its dialogue with renewable industry leaders to provide the latest market updates on the disruption, challenges and opportunities COVID-19 presents to the industry. This week, we focused on the energy storage market and hosted Chris McKissack, CEO at GlidePath Power Solutions. Glidepath was an early mover in energy storage. GlidePath is now one of the largest energy storage developers and independent power producers in the US, with over 100MW of commercially operating battery projects, 445 MW of battery storage and renewable energy projects, and 2.1 GW of greenfield development pipeline of battery storage projects across the US. We had an engaging discussion spanning the benefits of being an early mover in the storage space, the current state of the dynamic energy storage market, and successful strategies you can use to approach the opportunities and challenges stemming from COVID-19.

1. Batteries Can Now Serve as “Shock Absorbers” for the Grid

Batteries are capable of doing much more than just “energy shifting,” where a developer simply stores energy from a solar project from one time of day and dispatches it onto the grid at another time of day. For instance, we are now able to place stand-alone batteries closer to load than most large-scale wind and solar projects. This provides an opportunity for frequency response and regulation in that it allows grid operators to dispatch generators more efficiently. This is important to today’s market. 60 years ago, we had an unpredictable load, but very predictable generation. You could ramp-up and ramp-down generation by turning a dial. Today, we have more and more intermittent resources and renewables dispatching the grid resulting in more demand response. We now have both unpredictable load and unpredictable generation, making it much more difficult for the operators of the grid to balance the two. There is an opportunity for batteries act like shock absorbers for the grid and keep things stable.

2. Batteries Remain Key to Energy Shifting and Financial Energy Arbitrage

Despite the versatility of batteries, energy shifting remains an important use for batteries, particularly for financial energy arbitrage. Batteries provide an opportunity for load customers to marry their purchase of energy with their load and shape it to a particular financial profile. We see a lot of this usage by datacenters today and this trend will continue.

3. Early Movers in Energy Storage Will Likely Emerge from COVID-19 Even Stronger

The battery energy storage market was poised for a period of sustained growth in 2020 and 2021, but it is unlikely to emerge totally unscathed from COVID-19. According to some forecasts, market growth is now forecast to decline for 2020. The pace of the recovery will depend how quickly the COVID-19 crisis is resolved. However, depending on the agility of the company’s management and the status of the development of its projects going into COVID-19, some battery storage companies may come out of COVID-19 even [...]

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IRS Extends Deadline for ITC and PTC Projects

The IRS yesterday released anticipated guidance extending the placed-in-service deadline for the Investment Tax Credit (ITC) and Production Tax Credit (PTC). Under Notice 2020-41, the “Continuity Safe Harbor” was extended to five years for any project that otherwise began construction in 2016 or 2017.

As background, the applicable credit rate for the ITC and PTC turns on when a project begins construction. The IRS has issued a series of Notices providing guidance on when a project begins construction for these purposes. Under the guidance, taxpayers can either satisfy the “Five Percent Safe Harbor” or “Physical Work Test”. In addition to requiring certain activities in the year construction begins, both methods include a second prong, requiring certain continuous work until the project is placed in service. The IRS has previously provided the Continuity Safe Harbor, under which a project will be treated as having met the second prong so long as it is placed in service by the end of the fourth year after which construction begins on the project. If the project cannot meet the Continuity Safe Harbor, the taxpayer must satisfy the continuity requirement through facts and circumstances.

In the case of the Five Percent Safe Harbor (which requires continuous efforts), demonstrating facts and circumstances is time-intensive and challenging, and is inherently uncertain. In the case of the Physical Work Test (which requires continuous physical work), demonstrating facts and circumstances is likely impossible across four years, leaving many of these projects economically unviable in the absence of IRS relief.

The new Notice extends the Continuity Safe Harbor by one year – from four years to five years – for any projects that began construction in 2016 or 2017. This is welcomed relief for projects that have experienced delays related to COVID-19. The relief is particularly helpful in that it is a blanket extension for any projects that otherwise began construction in 2016 or 2017, without requiring taxpayers prove that delays were specifically related to COVID-19. If the extension were only available for COVID-19 delays, the relief would have had limited value, as taxpayers would have simply gone from trying to demonstrate facts and circumstances relating to continuous work, to having to demonstrate facts and circumstances relating to the nature of the delays. This blanket relief was particularly important, given the cascading impact of COVID-19 through the economy and the renewables industry – which experienced delays relating to supply chains, and also relating to financing and regulatory issues, among others. The extension of the safe harbor provides needed economic certainty for all of these projects.

Notice 2020-41 also provides relief for projects that intended to satisfy the Five Percent Safe Harbor in late 2019 but where equipment has been delayed. Under the existing guidance, costs are taken into account in 2019 under the Five Percent Safe Harbor if they are paid before December 31, 2019 and the property or services are delivered within 105 days of payment (the “105 Day Rule”).  Under the new guidance, if a taxpayer made payment on [...]

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Five Takeaways: An In-Depth Look at the Federal Legislative Game Plan to Support Renewables

On Thursday May 14, McDermott was joined by Gregory Wetstone, president and chief executive officer of the American Council on Renewable Energy (ACORE) to discuss the latest market updates on the severe disruption and uncertainty brought on the renewables industry by COVID-19.

Five takeaways from this week’s webinar:

      1. There is no clear insight yet into what a congressional relief package regarding renewable energy might look like, despite the fact that congress is discussing its fifth COVID-19-related response bill.
      2. Even though the outlook was already pessimistic, clean energy job loss has been worse than expected; there has been a loss of 94,000 jobs in the renewable sector between March and April and 600,000 additional unemployment claims across the clean energy sector.
      3. Renewables have a great potential to continue to be part of the nation’s economic recovery; two of the fastest growing job categories in the nation have been wind turbine technicians and solar panel installer.
      4. Senior Department of Energy officials have reassured that the recent bulk power executive order is a continuation of existing policies regarding transmission corridors and is not targeted at renewables, which are recognized as valuable for national security. See the Office of Electricity’s Q&A and contact email for a response to President Trump’s signed Executive Order, “Securing the United States Bulk-Power System” and join McDermott on May 21 for a legal analysis of the EO.
      5. The commerce department is undertaking an investigation which could lead to the imposition of additional tariffs, particularly in regards to transformers; the timing for these tariffs (if enacted) is likely right before the election.

Listen to the full webinar.

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Six Takeaways: Shifting Market Dynamics in Corporate PPAs


On Thursday, May 7, McDermott Partners Ed Zaelke and Carl Fleming were joined by Christen Blum, head of the Renewable & Analytics Advisory practices at Edison Energy, to hear her thoughts on the current effects of COVID-19 on the corporate power purchase agreement (PPA) market.

Below are six takeaways from this week’s webinar:

    1. Despite COVID-19, there is still a strong appetite for corporate renewable procurement: market leaders (such as tech, pharma, and food and beverage companies) have been less impacted by COVID-19 and remain interested in renewable procurement. On the other hand, companies that have been hit the hardest by COVID-19 (such as services and hospitality businesses) have traditionally demonstrated limited interest in renewables; but industrial companies have seen the largest effect of COVID-19—they remain interested in renewables, but are delaying their procurement as they focus on their core business.

    2. Although the trend for buyer-friendly PPA terms remains strong, the market has seen a recent uptick in prices over 2019 such that they no longer remain as buyer-friendly as they have been in the recent past, but the impact of COVID-19 on these prices remains to be seen.

    3. In order to maintain more competitive PPA prices, developers are employing a number of price mitigation strategies, including price collars, upside sharing and developers bearing more merchant risk.

    4. Most corporate buyers are less time-sensitive than more traditional buyers; as such near-term wind projects are often losing out on opportunities to cheaper solar projects which are coming online later.

    5. Force majeure terms have become a major emphasis in PPA negotiations now.

    6. The best advice for developers is to treat their relationships with corporate partners as a long-term partnership and to act accordingly in negotiations.

Listen to the full webinar here.

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Six Takeaways: How Utilities and IPPs Are Responding to COVID-19

On Thursday, April 30, McDermott was joined by Brett Kerr, vice president of external affairs at Calpine, Drew Murphy, senior vice president of strategy and corporate development at Edison International, and Andrew Campbell, director of regulatory support and planning at NiSource who shared their perspectives on how investor-owned utilities and independent power producers are managing the COVID-19 crisis.

Below are six takeaways from this week’s webinar:

      1. As businesses go back to work, it is essential that they carefully plan for a new normal, including consideration of travel restrictions, acquisition of personal protective equipment, maintaining social distancing of employees and contractors, and compliance with new rules and regulations.
      2. Utilities have been and will continue to optimize their maintenance schedules to balance safety and reliability concerns considering the essential nature of electricity and risks potentially associated with deferred maintenance.
      3. Although it is too soon to see the permanent effects of COVID-19, there has been a five to seven percent reduction in weather-normalized demand: this includes both an increase in residential demand and a larger reduction in commercial and industrial demand.
      4. Utilities are watching cash flow more closely as more customers are either not paying or deferring payment, and as commercial and industrial customers reduce demand. In California, where revenues are decoupled from electricity demand, this should not affect total revenues, but may lead to reallocation of rates across customer classes.
      5. A number of large commercial and industrial corporate customers with renewable and sustainability commitments are talking about placing these commitments on hold or rethinking them as recessionary impacts become clearer.
      6. Drops in load and low natural gas prices could detrimentally impact the economics of new renewable projects seeking financing and prevent the projects from moving forward. However, as renewables often dominate interconnection queues, if some of these projects do not come online, prices could actually remain constant.

Listen to the full webinar.

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