New energy finance study

DOE’s Lawrence Berkeley National Laboratory has published a new study exploring life beyond the current PTC/ITC framework: An Analysis of the Costs, Benefits, and Implications of Different Approaches to Capturing the Value of Renewable Energy Tax Incentives.   As Mark Bolinger, the author, describes it: under a variety of plausible future policy scenarios that are relevant to utility-scale wind and solar projects, the value of monetizing the tax benefits is found to no longer outweigh the incremental cost of tax equity. In these scenarios, which range from a permanent expiration of tax credits to making tax credits refundable to comprehensive tax reform, it will make more sense for sponsors – even those without tax appetite – to use tax benefits internally (even if it means carrying them forward in time) rather than to monetize them through third-party tax equity investors.

Bottom line: it may soon make sense to step away from tax equity in favor of debt financing.

John Harper, Birch Tree Capital principal, was a reviewer of the paper.