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Many of the largest U.S. clean energy developers and investors would likely increase their activity in this sector as long as there are no changes to energy tax credits, according to a study by the American Council on Renewable Energy. Billions of dollars in private sector investment could be dampened by tax credit uncertainty, warns the American Council on Renewable Energy (ACORE) in its latest report, Tax Stability for Energy Dominance . The agenda for national energy dominance, ACORE asserts, has never been more important. The report, which includes interviews and a survey of mostly senior executives working at 39 of the nations largest clean energy developers and investors, asserts that the United States will achieve energy dominance and protect energy investments by providing policy certainty, maintaining clean energy tax credits, and preserving the portability provision. The majority of respondents stated that they will continue to view clean energy as an attractive asset class and would not reduce their risk profiles in an environment with limited political change. ACORE found that most respondents maintained this view despite remaining concerned about existing market risks, such as insufficient transmission capacity, delays and costs associated with interconnection queues, inflation and input costs, and supply chain constraints. Repealing clean energy tax credits would result in a substantial decline in the number of projects being built. This translates into fewer jobs and lower property tax revenue for the counties where these projects would be built. Landowners would lose the rental income provided by clean energy projects, which helps farmers keep their farms in the family, one developer told ACORE. The ACORE survey also reveals that most investors and developers expect the variety of project financing sources to increase, particularly stand-alone transferability and hybrid tax-equity and transferability structures. However, the report warns that policy changes that repeal or devalue energy tax credits threaten to significantly reduce investment in the sector, along with ongoing regulatory changes and the implementation of additional tariffs that impact the clean energy supply chain. All investors and 90% of developers surveyed said they would plan to increase or maintain their activity in the U.S. clean energy sector as long as no changes were made to energy tax credits. Specifically, according to the report, 50% of companies investing $500 million or more annually intend to increase their investment by 10% or more, resulting in billions of dollars in private sector investment. Uncertainty over tax credits, however, could cause 84% of investors and 73% of developers to reduce their clean energy activity, the report found. Among respondents from companies with more than $1 billion in investments, 80% said they would significantly or moderately reduce their clean energy investment plans, which could result in the loss of tens of billions of dollars in private sector investment. Portability is now one of the main sources of investment within clean energy, often serving as the primary source for projects or complementing other sources of financing, such as tax equity, through hybrid structures. Portability allows small and medium-sized businesses to take advantage of tax credits, but prior to the Inflation Reduction Act (IRA) , the direct sale of tax credits outside of tax capital structures was not a viable avenue for monetizing tax credits. The IRA authorized owners of new clean energy infrastructure to sell nine types of tax credits to other businesses in exchange for cash. As a result, transferability has enabled the entry of new entrants into the clean energy sector, making it easier for more smaller companies and organizations to deploy their capital. “Without portability, tax capital will revert to the hands of the larger players, leaving no room for the new players needed for the industrys growth and evolution,” said one respondent, who works at a community solar and affordable housing investment fund. “Portability has made it much easier for US companies to invest in renewable energy. In the past, if you look at traditional tax capital, there were only a handful of players who could truly benefit from access to these tax credits,” an insurance broker told ACORE. ACORE recommended preserving the portability provision, which will allow for continued participation by small and medium-sized enterprises in the market and drive more projects from ideas on paper to concrete work on the ground. According to ACORE, federal energy tax credits have played a decisive role in creating a stable market environment to stimulate this growth. National energy has been bolstered by recent enhancements to these credits, which include production and investment tax credits for power generation facilities, domestic manufacturing, and critical mineral production, associated bonus credits, and new tax credit monetization options, such as portability. The report emphasizes that maintaining certainty around the current set of credits supports the continued development of U.S. energy, while enabling key benefits such as: promote job creation and local economic benefits affordable energy prices, improve network reliability strengthen global competitiveness the offshoring of manufacturing The United States needs an energy strategy that encompasses all of the above if it is to achieve energy dominance, said Ray Long, president and CEO of ACORE. We have an extraordinary opportunity to meet the challenge of demand growth with affordable, reliable, and secure energy, and we cannot afford to miss this opportunity by limiting our own advantage. |
