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Key Takeaways | Conventional Energy Companies Pivot to Renewables

How will traditional energy companies compete as the world transitions to renewable energy? In the latest webinar in our Energy Transition series, McDermott Will & Emery Partner Jack Langlois hosted Philip Tingle, global co-head of McDermott’s Energy and Project Finance Practice Group, and Michael Hanson, managing director of energy transition at Truist Securities, to answer exactly that. During the 30-minute discussion, they assessed the future for conventional energy companies, including key issues surrounding decarbonization and current tax credit frameworks.

Below are key takeaways from the webinar:

1. Timeline and Decision-Making. There is a broad divergence of views in how quickly the transition to renewable energy will happen, but changes in law and policy could accelerate that timeline. Conventional energy companies are taking small steps to get acclimated to new renewable opportunities because there are multiple factors they need to consider before deciding whether to enter into the renewable energy space: Strategic fit, materiality, profitability and risk. Many conventional energy companies that have successfully pivoted to renewable opportunities have done so by reutilizing their existing assets.

2. Carbon Capture. Carbon capture is often a strategic fit for oil and gas companies. However, companies, investors and banks are still struggling with the profitability of carbon capture because without government incentive, carbon capture is not profitable. The current incentive structures do not compel a sufficient amount of activity because they only compensate capture equipment owners, leaving out all the necessary downstream affiliates. Until this business model is corrected, banks especially will struggle with how to finance carbon capture.

3. Reconciliation Bill. Carbon capture incentives may be around for a while longer. In the reconciliation bill, there is a provision that would extend the Section 45Q carbon capture tax credit through the year 2032. However, the bill would also modify the tax credit to provide for wage and apprenticeship requirements. Companies will need to find ways to assure financing parties that they have met these additional requirements. If they can accomplish this, the extension period will allow greater opportunities for conventional energy companies to enter the space.

To access past webinars in this series and to begin receiving Energy updates, including invitations to the webinar series, please click here.




Key Takeaways | How Solar Industry Leaders are Addressing and Overcoming the US–China Trade War

The US-China trade war has caused a significant impact on the solar industry, and that impact is expected to grow. In this webinar, learn how solar industry leaders are handling the effects of the US–China trade war and how they are preparing for the future.

Our first webinar of this series featured McDermott Will & Emery partner Carl Fleming, Pine Gate Renewables Director of Regulatory Affairs Brett White, Vice President of Construction James Froelicher and Assistant General Counsel Jess Cheney.

Below are key takeaways from the webinar:

1. Withholding Release Order. The US Customs and Border Protection (CBP) issued a withholding release order (WRO) against Hoshine Silicon Industry Co. Ltd., a company located in China’s Xinjiang Uyghur Autonomous Region wherein all silica-based products made by Hoshine and its subsidiaries are to be detained at all US ports of entry. Because of this WRO, manufacturers have been moving outside of the Xinjiang Uyghur Autonomous Region in order to avoid being subject to it.

There have been numerous detentions of silica-based products at multiple ports across the United States, and it is expected that the detention of materials will continue. In order to combat this, suppliers and industry leaders are presenting documentation to show that the materials are not being produced from forced labor or Hoshine and its subsidiaries.

Although the WRO was expected to cause significant disruption, it is not having as large of an impact as feared because many suppliers had already left the Xinjiang Uyghur Autonomous Region.

2. Anti-Dumping and Countervailing Petition. Anti-Dumping and Countervailing Petitions filed in August 2021 requested that the US Department of Commerce (DOC) include additional tariffs against solar panel imports from Malaysia, Thailand and Vietnam. The petitioners requested additional tariffs ranging from 50% – 250%. The DOC has yet to decide whether to investigate based on the petition, however, the impacts of the petition are already being felt with disruptions to the supply chain. If the DOC were to investigate, the solar industry would likely see a severe slowing of projects in 2022 and 2023 as neither suppliers nor developers are willing to bear the economic risk of the potential tariffs.

3. The DOC and the Biden Administration. The DOC and the Biden administration are expected to make decisions regarding tariffs, as well as anti-dumping and countervailing duties, that will directly affect the solar materials supply chain.

The Biden administration hopes to increase the domestic supply of solar materials, however, domestic manufacturers currently only produce approximately 25% of the overall demand for solar materials. As a result, the solar industry cannot immediately divert to purchasing solar materials from domestic manufacturers as the supply simply is not available. As an incentive to increase domestic manufacturing, solar industry leaders hope tax credits can be offered to companies that manufacture solar materials.

The Biden administration is expected to decide whether the 18% tariff on imported solar panels that [...]

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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.

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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.




Sequestration to Result in Across-the-Board 8.7 Percent Reduction of 1603 Grant Payments

by Melissa Dorn

The United States Department of the Treasury released a notification on March 4, 2013 clarifying how sequestration will affect payments awarded under Section 1603 of the American Recovery and Reinvestment Tax Act of 2009 for specified energy property in lieu of tax credits. Treasury stated that it will reduce the amount of each final award issued from March 1, 2013 through September 30, 2013 by 8.7 percent, regardless of when the application was received by Treasury.  The 8.7 percent sequestration rate is subject to change following September 30, 2013.

For more information please contact your regular McDermott lawyer of Phil Tingle at +1 305 347 6536 or ptingle@mwe.com.




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