Tax Equity Financing For Utilities: Another Helping Of Renewable Energy, But Hold The Tax Credits

Many consumers want more of their electricity to come from clean energy sour1ces like wind and solar. And many regulated utilities have responded, adding a record number of renewable energy projects to their portfolios, relying, in part, on federal tax credits and advanced technology to reduce the cost of those projects.

The recently enacted Tax Cuts and Jobs Act, however, has threatened to turn the clean energy boom into a fizzle. The Act reduced corporate taxes - and thus utilities' appetite for tax credits - across the board.

Fortunately, there may be a new solution emerging for regulated utilities: tax equity financing.

Federal Production Tax Credits
In late 2015, Congress enacted the Protecting Americans Against Tax Hikes Act, which extended the eligibility of wind and other renewable projects for federal Production Tax Credits (PTCs). The PTCs are now scheduled to phase out by 2020.

Qualifying renewable energy projects like wind earn PTCs based on the amount of electricity the project generates. This is calculated on a megawatt-hour basis (MWh) for the first ten years after the project is placed into service.

Source: Forbes
Date: Jul 18, 2018