One feature of the nearly $ 2 trillion Build Back Better bill that infrastructure managers highly appreciate is its tax subsidy provisions for renewable energy.
Reuben Munger, Boulder, Colo.-Based managing partner of $ 2.5 billion infrastructure manager Vision Ridge Partners LLC, said this aspect of the Build Back Better bill – included in the version passed by the House representatives Nov. 19 – changes the way renewable energy tax subsidies are awarded.
Currently, renewable energy projects are financed through tax equity financing controlled by a small group of banks that purchase the tax attributes of renewable energy projects but charge fees and add requirements for the size and type of project the bank would finance, he explained. Many renewable energy projects, including some wind, solar, geothermal and carbon capture initiatives, depend on tax subsidies but are hampered because they are not large enough to attract an investor base and therefore cannot secure of funding through the tax fairness market, Mr. Munger said. .
Under the Build Back Better Act, the federal government would instead give developers a cash tax refund, he said.
Tom Osborne, executive director of the infrastructure team at New York-based IFM Investors, said the extension of renewable energy tax credits in the Build Back Better Act would be “a significant development.”
“It is important to note that the current project also includes direct payment arrangements allowing a wider range of investors to invest in renewable energy development, as they could monetize the tax incentives rather than rely on the tax fairness market which is not available to all developers today. “
Additional tax advantages could increase the number of renewable energy projects built, as the tax advantages would allow developers to offer “an even more attractive price to the market or to companies that sign power purchase contracts”, he said. said Keith Derman, based in New York. partner and co-head of infrastructure and energy at Ares Management Corp.
“In the renewable space, when you think of wind power and solar in particular, they are already low cost for generating electricity without tax benefits,” Mr. Derman said. But giving tax benefits through Build Back Better would give them an even better advantage, he said.