Utility Dive published an article by AEE CEO Nat Kreamer noting impact of the COVID-19 crisis on the advanced energy industry and recommending a no-cost legislative fix for Congress to keep projects, companies and workers moving forward. Read excerpts below and the entire UD piece here.
As the nation confronts the coronavirus crisis, protecting human health and safety, mitigating the financial impact on people facing job loss or disruption, and addressing the disruption of those industries that are most affected by this health crisis must be the priority. Many of the 3.5 million workers in the advanced energy industry have jobs on the line right now. COVID-19 has disrupted the global supply chain of the advanced energy industry, which impacts the industry's workforce, suppliers and customers.
Construction delays and economic uncertainty are jeopardizing financing of projects through available federal tax credits. All of these factors affect advanced energy companies' ability to support their current workforce and help American's save money on energy consumption, which is an essential basic service. Some impacts are unavoidable, and some may be best addressed in future measures to get America fully back to work. But there is one simple, no-cost fix that Congress could enact now to keep a large part of the advanced energy industry on track: direct payment of federal incentives for advanced energy development.
Installations of solar, wind, battery storage, fuel cells, and other advanced energy technologies receive financial support from federal tax credits, which are used to finance projects. Those tax credits are realized through the tax equity market, where companies claim the credit on their taxes after investing in renewable energy projects. Because any American taxpayer is eligible to invest in renewable energy and claim a federal tax credit for doing so, theoretically the tax equity market should be very large with many participants.
However, unfamiliarity with energy investments, the illiquid nature of tax credit investments, and the arcane rules associated with them drastically constrain the tax equity market, throttling the growth of the industry in good times and threatening its solvency in crises that include the 2008 Great Recession and today. The reality is the tax equity market is concentrated among a dozen large banks that profit from controlling the market.
When the economy suddenly grinds to a halt, as it is doing now because of the COVID-19 pandemic, the banks forecast little tax liability to be offset – and the tax credits become worthless...
...Congress can fix this, once and for all, by converting all Section 48 tax credits to 100% direct payment, and making the change permanent.
Read the entire UD piece here.