How the US climate bill will finance the energy transition [partner content]

enOctober 24, 2022

Catalyst with Shayle Kann

Podcast Summary

Unexpected excitement and challenges in renewable energy sector post National Climate Bill: The National Climate Bill brought unexpected excitement and challenges for the renewable energy sector, leading to a flurry of deal activity and reevaluation of financial structures.
The passing of America's National Climate Bill brought unexpected excitement and challenges for those in the renewable energy sector. While politicians and pundits dominated the public discourse, individuals like Britta von Ossen and Kayla Schultz, who work on implementing renewable energy projects and advising corporations on financial structuring, closely watched the bill's progress. Initially, both were cautiously optimistic, but many deals continued under the status quo. However, after the bill's passage, deals went into a frenzy, requiring reruns of numbers and reapplications of offers. Kayla, initially sitting somewhere in the middle of the optimism spectrum, saw some clients pause deals to rerun numbers. The bill's impact sent a roller coaster of emotions and actions in the renewable energy sector.
Achieving America's energy transition goals with the Inflation Reduction Act: The Inflation Reduction Act is expected to increase renewable energy by 30%, generate over $300 billion in investment, and put the US back as a climate leader. It builds on existing framework to support clean energy and creates momentum towards a more sustainable future.
The Inflation Reduction Act is a significant step forward in achieving America's energy transition goals towards carbon neutrality. Without the bill's incentives, the path to decarbonization would be much more challenging. This legislation is expected to increase renewable energy technologies by 30% and generate over $300 billion in incremental investment. It puts the US back on the global stage as a serious climate negotiator and brings us closer to a net zero grid. While it is a complex tax bill, it builds on the existing framework to support clean energy in America. Overall, the Inflation Reduction Act is a practical and symbolic win for climate, propelling the industry forward and creating momentum towards a more sustainable energy future.
Significant changes to renewable energy tax credits: New tax package could increase project value by 30-100% through enhanced solar tax credits, transferability, direct pay for tax-exempt orgs, and adders for domestic content and community projects
The new tax package brings significant changes to the renewable energy sector, with potential increases in tax credits for solar projects, transferability options, direct pay for tax-exempt organizations, and adders for domestic content and projects in designated communities. These changes could result in a 30-100% increase in project value, making it a meaningful shift from the current tax regime. However, there are still questions to be answered regarding the implementation of these new provisions, particularly regarding the adders, transferability, and direct pay options. The limited supply of tax equity investors may also create a supply-demand imbalance in the market. Overall, the new tax package represents a significant opportunity for the renewable energy sector, but it will require careful planning and navigation to fully realize its potential.
Simplification and expansion of tax credits fuel investor interest: The simplification and expansion of tax credits for renewable energy and other sustainable technologies are attracting new investors to the industry by extending the investment window, simplifying transferability, and potentially easing monetization. This trend is expected to continue, driving growth in the renewable energy sector.
The expansion of tax credits for renewable energy and other sustainable technologies is bringing new investors into the industry by extending the viable investment window. This simplification of transferability and potential ease of monetizing tax credits is increasing the investor pool, especially for those who found the complex structuring and accounting components daunting. Additionally, the surge in demand for carbon capture, storage, and new technologies has created an imbalance in the market, with both demand and supply increasing. This trend is expected to keep the mergers and acquisitions landscape hot, with short-term gains from tax credits and long-term benefits from the shift towards sustainable energy. Overall, the simplification and expansion of tax credits are making tax equity transactions more accessible to a wider range of investors, driving growth in the renewable energy sector.
New tax credits boosting renewable energy storage market: The Inflation Reduction Act's new storage tax credits are driving renewed investor interest in renewable energy pipelines, projects, and storage solutions, with the market projected to attract over $160 billion in investments over the next decade.
The Inflation Reduction Act is driving renewed interest from investors in acquiring renewable energy pipelines and platforms, as well as developing renewable energy projects, storage, and carbon capture in the US market. The act includes new storage tax credits, which is a long-awaited addition in the industry, and the combination of investment and production credits will significantly boost the storage sector. With intermittency and congestion issues becoming more prevalent as the country shifts towards more renewable energy, storage is seen as the solution. The storage market is projected to attract over $160 billion in investments over the next decade, and while it may not outpace solar, it certainly has a better chance now with the new credits available. The short-term impact on corporate valuations is yet to be seen, but there is already an uptick in active processes and strong investor interest.
Surge in Demand for Storage Pipelines and Solar Energy: California and Texas lead the surge in demand for standalone storage pipelines and their combination with solar energy. The energy sector will see a significant increase in the adoption of carbon capture and hydrogen technologies, driven by new tax incentives.
The demand for storage pipelines, particularly in standalone form and in combination with solar energy, is expected to surge in the coming months, primarily in regions like California and Texas. The energy sector is also poised to see a significant increase in the adoption of emerging technologies like carbon capture and hydrogen, with investors showing growing interest due to new tax incentives. The passage of the new bill extending these tax credits was a surprise, leading some to reevaluate deal economics. Overall, the energy transition on the grid will continue to be driven by wind, solar, and batteries, but these emerging technologies are expected to see increased activity as well.
Excitement and momentum in renewable energy sector with the passage of Inflation Reduction Act: The Inflation Reduction Act's passage brings excitement and momentum to the renewable energy sector, adding complexity and requiring expertise for financing, tax, and audit issues
The Inflation Reduction Act, a long-anticipated piece of legislation in the renewable energy sector, has finally passed. This bill includes provisions for critical components like storage infrastructure, which have been predicted but not yet seen. However, there may still be surprises and further guidance to come as the industry processes the bill's implications. Kayla Schultz, a renewable energy expert, emphasized the excitement and momentum in the industry, with many companies seeking to understand how the bill will impact their business and potentially entering into new transactions. The passage of the bill adds complexity to an already intricate renewable energy market, making the expertise of firms like Kone Resnick and Kone Resnick Capital invaluable for navigating financing, tax, and audit issues.

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Under the hood of data center power demand

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Catalyst with Shayle Kann

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Could VPPs save rooftop solar?

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Catalyst with Shayle Kann

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Understanding SAF buyers

Airlines are lining up to buy as much sustainable aviation fuel (SAF) as they can, despite it costing two to three times more than conventional jet fuel, according to BloombergNEF. United Airlines has secured 2.9 billion gallons of SAF over, and others like Delta, Air France-KLM, and Southwest have secured around 1 billion gallons each. And yet to meaningfully decarbonize aviation, the SAF market needs to grow thousands of times larger than it is today. BloombergNEF estimates that global production capacity will grow 10-fold by 2030, but by then supply will still only meet 5% of jet fuel demand. So how are airlines thinking about scaling up their procurement of SAF? In this episode, Shayle talks to Amelia DeLuca, chief sustainability officer at Delta. They cover topics like: Who pays the green premium Infrastructure considerations, like SAF hubs and blending Technical pathways, like hydroprocessing, alcohol-to-jet, and power-to-liquids The role of incentives and regulation, like ReFuelEU Why airlines should procure SAF instead of buying carbon removal Recommended Resources: BloombergNEF: United Airlines Is Betting Big on a Pricey Green Aviation Fuel The Verge: Delta Air Lines lays out its plan to leave fossil fuels behind Canary Media: Can corn ethanol really help decarbonize US air travel? Canary Media: How hydrogen ‘e-fuels’ can power big ships and planes Catalyst: CO2 utilization Catalyst is supported by Origami Solar. Join Latitude Media’s Stephen Lacey and Origami’s CEO Gregg Patterson for a live Frontier Forum on May 30th at 1 pm Eastern to discuss Origami’s new research on how recycled steel can help reinvigorate the U.S. solar industry. Register for free on Latitude’s events page.

Catalyst with Shayle Kann

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The news quiz episode!

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Catalyst with Shayle Kann

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CO2 utilization

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Catalyst with Shayle Kann

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Related Episodes

Pumped-storage hydropower could help renewable energy flow

Back in the 1970s, the Tennessee Valley Authority built what remains one of the largest energy storage facilities in the world: a pumped-storage hydropower plant. A pump takes water from the Tennessee River, shoots it up a giant shaft and holds it there until electric power needs peak during the day. At that point, the water is allowed to drain back down, spinning turbines that can generate enough power for a million homes. It’s almost like a gravity-powered battery as big as a cathedral … buried deep inside a mountain. Marketplace’s Lily Jamali spoke with Robert Kunzig, a freelance journalist who recently wrote about this in depth for the publication Science. He says pumped-storage hydro is attracting a lot of interest, thanks in part to generous tax credits from the 2022 Inflation Reduction Act.

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Frontier Forum: Diving into the booming transferable tax credit market

It's been a year and a half since the Inflation Reduction Act was passed. In that time, we've seen $110 billion in planned investments for factories that are pumping out electric cars, batteries, solar modules, and wind towers. The upper end of 2030 forecasts show nearly twice as much zero-carbon generation getting built compared with scenarios without the law in place. Much of this activity is the result of a new shift in the US tax code that allows wind, solar, storage, hydrogen, carbon capture, and manufacturing tax incentives to be sold for cash. It’s creating a lot more deal volume as many more companies can now buy those credits to support new development. “This very rarely happens that a new market forms basically overnight. The private estimates on how big the market gets get it to something like $80 or $100 billion dollars by the back half of the decade,” said Alfred Johnson, co-founder and CEO of Crux, speaking at Latitude Media’s Frontier Forum. In January, Crux closed an $18 million Series A round led by Andreesen Horowitz – bringing the company’s total funding to $27 million to scale its sustainable finance platform. It’s been about a year since credits started trading, with activity really picking up in the last six months. Much of our understanding of how the market is performing comes from new research from Crux, which recently surveyed 150 buyers, sellers, and intermediaries – and found a mix of eagerness, hesitance, surprises, and lots and lots of questions. Stephen Lacey spoke with Alfred Johnson live during Latitude's Frontier Forum to address many of those questions – and riff on how this new market is taking shape. You can watch the full conversation, including questions from the audience, here.

Catalyst with Shayle Kann

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133: Sand Batteries and Thermal Energy Storage

https://youtu.be/zYCNuQsa8Uw

Matt and Sean discuss thermal energy storage and storing heat in sand for days, weeks, or possibly months.

Watch the Undecided with Matt Ferrell episode, “How A Sand Battery Could Change The Energy Game”: https://youtu.be/G6ZrM-IZlTE?list=PLnTSM-ORSgi5LVxHfWfQE6-Y_HnK-sgXS

YouTube version of the podcast: https://www.youtube.com/stilltbdpodcast

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Ep. 25: VP Zach Smith on the Interconnection Process & Growth of Clean Energy on the Grid

“The objective is the reliability of the grid,” VP of System & Resource Planning Zach Smith says about the process his group oversees studying the impacts of connecting new electric resources to the grid. Because of state policies and technological advancements, more developers are seeking to connect to the grid, creating more demands on the New York ISO in overseeing the study process.

Smith is a frequent guest of the Power Trends podcast. His conversations on grid planning, reliability, and resource interconnection are routinely among the most popular of our series. In this episode, he discusses how the NYISO is required to study the impacts of new resources like large wind, solar and battery storage facilities seeking to connect to the electric system.

“It’s being able to integrate new resources onto the grid as we transition to a renewable future,” he says. “That means that as we connect these new resources, we analyze their impact, and identify upgrades to maintain the performance of the system.”

State and federal clean energy policies are driving a dramatic increase in clean energy projects entering the Interconnection Queue, where they will be studied for feasibility and grid reliability impacts. The process requires the expertise of many of the NYISO’s most skilled engineers and analysts.

“It’s something I take great pride in: the talent in the team and experts we have,” says Smith. “But we also have a lot of challenges ahead of us.”

The Interconnection Queue has experienced change. A few years ago, it was typical to see between one and two hundred resources applying. Today, the Interconnection Queue contains nearly 500 proposals. Factors driving this historic growth include New York’s requirement of a zero-emissions grid by 2040, new incentives to build new solar, wind, and storage resources, and public policy needs that incentivize new transmission investment.

In this podcast, Smith discusses the three successive studies that examine the impact of each new resource, as well as their collective impact and the potential need for system upgrades. The process involves continuous collaboration between the developers, local utilities, and the NYISO. Some project proposals are more fully realized than others. Sometimes a resource will elect to drop out of the process, requiring a new round of studies, adding to the time it takes for all remaining resources to get to the end.

The NYISO has several initiatives underway to make the process more efficient and user-friendly for applicants. “The technology continues to change,” Smith said. “We’re working hard here in New York to keep things moving along.”

Additional Resources & Information

Whitepaper: The NYISO Interconnection Process
Press Release: NYISO Completes Interconnection Study Process to Connect New Resources to the Electric Grid
Explainer: How New Electric Resources Connect to the Grid

Learn More

Follow us on Twitter @NewYorkISO and LinkedIn @NYISO
Read our blogs and watch our videos
Check out our 2040 grid page

Power Trends: New York ISO Podcast

en-usFebruary 23, 2023

Episode 48: Interest Reduction Act Passes

In this episode we discuss:

The Inflation Reduction Act has passed.
- There are energy improvement credits available.
- The electric vehicle credit has been revamped.
The IRS has been given additional funding for improved customer service and agents.
There are small business startup funds available for qualifying research and development costs.
Passthrough entity taxes are due 9/15.

We also hear from our guest, Kristin Garramone, of Roma Italian Ristorante and Sul Tempo Cocktail Lounge. She tells us about their vision of creating a classic Italian restaurant with a new twist, persevering through COVID and the current staffing struggles, why being a restauranteur means so much to her, and what's next for Roma.

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