Federal and State Structures to Support Financing Utility-Scale Solar Projects and the Business Models Designed to Utilize Them

Abstract

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Solar Power. Policy Overview and Good Practices

“…At least 25 countries have adopted investment and production tax incentives to support solar technology deployment. 10 Investment tax credits (ITCs) reduce the tax liability for owners of solar projects based on the capital investment in the project (Mendelsohn and Kreycik 2012). ITCs have relatively low transaction costs and are particularly effective in addressing the risks associated with early deployment technologies that have high upfront costs (Philibert 2011).…”

“…If the developer of the project does not have sufficient tax liability to take advantage of the tax incentive in its entirety, it may be necessary to bring in a tax equity investor that can utilize the full benefit. This process increases the transaction costs, and, essentially, reduces the value of the credit (Mendelsohn and Kreycik 2012).…”

Policies to Support Wind Power Deployment: Key Considerations and Good Practices

“…Two of the most widely adopted renewable energy tax incentives-investment and production tax credits-have been enacted in 37 countries (REN21, n.d.). A wind production tax credit (PTC) provides a credit to companies producing wind energy on a per-kilowatt-hour basis, while an investment tax credit (ITC) reduces the wind project owner's tax liability based on the capital investment in the project (Mendelsohn and Kreycik 2012).…”

Section 1603 Treasury Grant Expiration. Industry Insight on Financing and Market Implications

“…In contrast, participation by tax equity investors by definition involves some sharing of ongoing cash flows and residual value, with the percentage varying by the financing structure employed. 53 Importantly, the transaction cost of raising tax equity is independent of deal size. The legal and engineering costs to evaluate the project and establish the associated partnership, lease, or other financial structure are relevant for a tax equity investment of $25 million or $250 million.…”