Wind companies are ramping up their effort to expand financing opportunities for renewable energy projects even though some in the industry fear a Trojan horse move by conservatives to undermine the prized production tax credit.
A new coalition was officially announced Tuesday that’s aimed at expanding the use of so-called master limited partnerships – now enjoyed by the fossil fuel industry – to renewable energy projects. But the effort has been building for quite some time.
“That’s taken quite a while to get some momentum behind it,” Paul Gaynor, CEO of Boston-based First Wind, one of the dozen or so founding companies of the new Financing America’s Investment in Renewables coalition, told POLITICO last month. Gaynor said about nine months of discussion led to the launch of the coalition’s website in early May and Tuesday’s official unveiling.
Specifically, the coalition is focused on helping House and Senate MLP expansion bills led by Sens. Chris Coons (D-Del.) and Jerry Moran (R-Kan.) and Reps. Ted Poe (R-Texas) and Mike Thompson (D-Calif.). The idea is also to gain traction to include such language in broader efforts to reform the Tax Code.
Meanwhile, the industry’s main advocacy group, the American Wind Energy Association, remains focused on renewing a wind production tax credit that expires at the end of the year after Congress gave it a one-year reprieve in January. And some in the industry worry that conservative groups are advocating expansion of MLPs to undermine any extension of the production tax credit.
“The concern is that there has been a lot of chatter among congressional Republicans who aren’t necessarily favorable about supporting the PTC,” one wind energy executive said. “There’s some intention here to get rid of the PTC more quickly than Congress would otherwise do if they enact the MLPs as Sen. Coons has drafted. People need to be wary about pushing the MLPs too strongly.”
Joseph Condo, senior vice president and general counsel of Chicago-based Invenergy, agreed that wind supporters have some cause to be wary.
“Look, some folks that aren’t especially fond of the PTC sort of took it upon themselves to state publicly that their opinion was that this is a trade-off,” Condo said. “And again, that’s not coming from the supporters and drafters of the legislation. We’re trying to be very vigilant about making sure the MLP parity act doesn’t get hijacked into becoming something more than it’s supposed to be.”
Coons said he’s aware of the concerns.
“I completely understand the concerns of the wind community given how last minute the [PTC] extension was, how relatively short term the extension is,” Coons told POLITICO recently. “My hope is by getting parity for renewables in the MLP structure that we will make one important solid step towards a predictable, long-term incentive structure.” He added that he also plans “to make the case strongly to why PTC is still needed and why it’s complementary to an MLP strategy.”
Some wind and solar executives say their fears are underscored by a recent opinion piece by the tea-party-aligned Americans for Prosperity as well as tentative backing that the MLP concept has received from PTC foes such as Rep. Mike Pompeo (R-Kan.).
“Broadening MLP eligibility while simultaneously – and this is the critical component – ending the production tax credit has the potential to turn renewables’ attention to the same place other fledging sectors get their capital: the equity markets,” wrote James Valvo, director of policy at Americans for Prosperity.
Valvo told POLITICO that he recently received a call from someone representing the FAIR coalition – though there was no talk about the idea of trading the production tax credit for an expansion of MLPs.
“It was more that they were bringing to my attention that they existed” and that “there’s a group of wind folks that aren’t just on PTC all the time,” Valvo said.
Gaynor emphasized that his coalition isn’t advocating any trade-off.
“I think all of the people in the FAIR coalition are on the same page with respect to it not being a replacement to the PTC,” he said of the MLP expansion. “In conversations, in front of AWEA, we were very clear that it’s not a replacement.”
But wind supporters recognize that the PTC has a limited life.
“I think the industry would like the PTC to stay forever, but I think they also see the writing on the wall,” one Senate GOP aide said. “I don’t think they want to trade the PTC for a MLP, but I think they want to get the MLP in place … to have a backstop.”
AWEA’s Peter Kelley said his group will continue to endorse the Coons bill “because MLPs allow the general public to invest in renewable energy.” But the PTC remains the top priority. “And MLPs are an appropriate complementary policy to the PTC,” he said.
The appeal of MLPs is allowing ordinary people to invest in wind and other renewable projects. They are business structures that are taxed like partnerships but have shares traded like corporate stocks, thus lowering capital costs and attracting more investment. Only oil, natural gas, coal and pipeline projects are currently eligible.
“I used to get calls constantly from folks saying they wanted to invest in wind; how do I do that? I didn’t have an answer,” said Jaime Steve, former legislative director at AWEA who is now the director of government affairs at Pattern Energy.
He said the fear about Coons’s bill undermining a PTC extension is “probably somewhat overblown.”
“There is a concern there that a small fraction of people will try to link the two,” Steve said. “But the level of concern is not huge.”
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