Posts Tagged ‘energy’

North American Windpower: Congress Wades Into Alphabet Soup Of Wind Tax Incentives

Congress recently provided the wind industry fodder for speculation regarding the future of renewable energy tax incentives. Below is a discussion of the modified accelerated cost recovery system (MACRS) depreciation news, followed by a discussion of the future of production tax credits (PTCs) and the possibility of extending master limited partnership (MLP) status to renewable energy projects.

First, Sen. Max Baucus, D-Mont., who chairs the Finance Committee, released his outline of corporate tax reform. His proposal is intended to achieve a lower corporate tax rate (the exact rate remains to be specified) but sacrifice MACRS.

Under the proposal, a wind farm would be depreciated 5% a year using a declining balance calculation, meaning 5% in the first year, 4.75% (i.e., 5% of 95%) in the second, and so on. This is drastically less accelerated than the current depreciation over five years, using a 200% declining balance. Further, as compared to the 50% “bonus” depreciation that is available for projects in service this year, it is a drop in the bucket.

The value of MACRS in a wind tax equity transaction varies between 10% and 30% of the tax equity investor’s economics. (The range is due to the varying cost of funds of different investors and varying tax appetite assumptions.) Sen. Baucus’ proposed depreciation methodology would wipe out that benefit.

In an apparent effort to avoid triggering heart attacks throughout the industry, the senator’s proposal has a reference to “considering improving and making permanent the energy tax credits set to expire in 2013.” The statement appears to be referring to the PTC. (The 30% investment tax credit (ITC) for solar does not expire until the end of 2016, but it would be surprising if the proposal only addressed PTCs.)

The wind industry must wait until Baucus releases the summary of tax reform provisions related to energy to know what the senator has in store for the PTC.

The likelihood that the proposal to expand MLP rules to include renewable energy projects as part of tax reform increased when the Joint Committee on Taxation “scored” the proposal in the Master Limited Partnership Parity Act (S.795) as costing a modest $1.3 billion over the 10-year scoring period.

In the context of tax reform, $1.3 billion is a low amount. For instance, replacing MACRS raises an estimated $500 billion. Further, the last time the PTC was extended for just one more year, it was scored as costing $12 billion. Thus, the MLP expansion is little more than a rounding error in tax reform.

The benefit of MLP status is being able to raise equity from the public while only incurring a single layer of tax. That tax is imposed at the unit holder level only. Under current law, MLPs cannot effectively pass-through tax credits or tax deductions (e.g., depreciation) in excess of their income to individual investors, and no proposal has been introduced to modify those limitations.

Therefore, the proposed MLP change does not eliminate the need for tax equity investors or address the shortage thereof. What the MLP change would do is permit “sponsor” equity to be raised from retail investors and create a secondary market for projects that are beyond the tax credit period.

The MLP legislation has bi-partisan support. Besides Sen. Chris Coons, D-Del., who reintroduced the bill in April, supporters include Sens. Mary Landrieu, D-La., and Debbie Stabenow, D-Mich. On the Republican side, supporters include Susan Collins, R-Maine, Jerry Moran, R-Kan., and Lisa Murkowski, R-Alaska.

A similar bill was introduced in the House in August by Rep. Mike Thompson, D-Calif., and was co-sponsored by 18 other Democratic House members. In addition, the White House appears to support the proposal.

The MLP expansion also has some odd allies when it comes to trade associations. For example, the proposal has been endorsed by the American Petroleum Institute (API). There are two potential rationales for that support. The first is that API may believe that the MLP rules are less likely to be a sacrificial lamb in the tax reform process if the renewables industry is also a beneficiary of the rules. The second is that API may hope to couch the expansion of the MLP rules as a trade for allowing the PTC and ITC to expire.

For that reason, the support from the renewable energy trade associations has been somewhat tepid. They would like to see the MLP rules expanded but not at the expense of tax credits. The financial benefit of the MLP rule expansion is a fraction of the value of the tax credits.

There has not been an analysis prepared yet that compares the value of the MLP expansion to the value of MACRS.

However, if Baucus carries through on the suggestion that he would improve and make permanent the PTC and that is combined with an expansion of the MLP rules, it would constitute a proposal that would merit careful analysis by the wind industry. It would be a novel experience for wind developers to be able to make long-term plans that do not have to account for the possibility that the PTC may lapse.

David K. Burton is partner at law firm Akin Gump Strauss Hauer & Feld. He can be reached at (212) 872-1068 or dburton©akingump.com

via North American Windpower: Congress Wades Into Alphabet Soup Of Wind Tax Incentives.

Site Prospecting « WINData LLC

As a wind energy development company, WINData has focused for over 22 years on wind energy site prospecting throughout the US. The company creates value by conducting detailed site identification and resource analysis, securing development rights and demonstrating project viability.

WINData’s wind site prospecting personnel have long term expertise in desktop level studies, site topographical explorations and met program design of prospective windy real estate parcels. WINData provides project management for installation of met towers and instrumentation of a prospect site.

As part of the prospecting process, WINData experts explore the complexities or hidden attributes of the site to determine early critical path issues. WINData works with local entities, future power off-takers, and development entities from the outset to streamline the development process and build appropriate levels of awareness about a site’s potential.

Once site prospect is leased, met towers are installed and data is flowing into WINData’s servers, we continuously monitor and analyze data as a precursor to a full site assessment study which usually occurs after a year or more of data is collected.

via Site Prospecting « WINData LLC.

WINDataNOW « WINData LLC

WINDataNOW

THE WINDATANOW HIGH FIDELITY MET TOWER DATA SYSTEM

Renewable energy, responsible natural resource management, and energy independence have become hot topics in politics, the marketplace, and on Main Street. Wind energy has long been the cornerstone of the renewable energy movement, and is easily the most visible and tangible of all the emerging renewable energy sources.While the prospect and promise of wind energy is attractive, the realities of effective energy production lie beneath the purview of the public’s eye. To help make wind energy a more viable component of the United States’ energy portfolio, the current administration has created grant programs to help spur innovation across a wide spectrum of wind energy topics. These include prospecting, equipment and farm design, forecasting, and energy management.

WINDataNOW Technologies, LLC (“WINDataNOW”) believes that significant opportunity exists for improvements in the operation of existing wind farms. Through the application of modern instrumentation and data collection techniques,

WINDataNOW believes that significant design and operating advantage can be achieved by developing a more rigorous understanding of how a wind resource behaves. From selecting the right location to maximizing the power output and stability of the grid – a detailed understanding of a wind resource and return significant efficiency and equipment availability gains in addition to insulating an operating company from the inherent penalty risks associated with bidding into today’s power markets.

Customer companies use WINDataNOW’s technology to get the meteorological data they need to make critical operating and resource assessment decisions with confidence. Applications of WINDataNOW’s technology are far reaching and include:

Optimal site selection and characterization

Using detailed meteorological data for reduction in forecast uncertainty to improve scheduling, planning, and operations

Understanding the wind turbulence profile of the site

Creating the ideal wind farm design for a particular site

WINDataNOW’s technology leverages the significant advantage of being able to fit in-place with existing systems and works right alongside all the usual operating information from industry standard SCADA systems. Using WINDataNOW’s technology, operating companies gain unparalleled insight into their operations on a minute by minute basis and can more predictably participate in their utility market.

via WINDataNOW « WINData LLC.

Services « WINData LLC

WINData offers a full range of wind energy consulting services for resource selection, siting and analysis of site potential.Our wind energy consultants have been in the siting business since 1991 and have been involved in every aspect of the business from initial land owner relations to negotiations with power off-takers.

WINData stresses project suitability, comprehensive site analysis, investment quality proposals, community acceptance and an environmentally benign design approach. Our clients include landowners, investors, large-scale wind developers, real estate developers, law firms, utilities, federal, tribal and state governmental agencies and other clients across the nation and worldwide.

From project conceptualization, feasibility assessments and initial development work to investment finance due diligence and construction project management, WINData provides deep domain experience and crucial expertise in the development of superior wind projects, wind portfolios and project pipelines.

via Services « WINData LLC.

WINData LLC

WINData, LLC is a veteran engineering company providing professional project and site development services to the wind industry. WINData’s wind project work comprises over 15 GW of wind farms and conceptual developments ranging from pre-developed to late stage developed sites across the western US.

WINData’s pioneering work in the 1990’s and early 2000’s contributed significantly to the wind energy projects on the Blackfeet reservation, Cut Bank/Ethridge and Judith Gap in Montana; the Columbia River Gorge in Washington and Oregon and in Casper Wyoming

WINData offers a full range of wind energy consulting services for resource selection, siting and analysis of site potential. Our wind energy consultants have been in the siting business since 1991 and have been involved in every aspect of the business from initial land owner relations to negotiations with power off-takers.

WINData offers the following comprehensive professional services to clients on an “out-sourced” basis:

Utility and energy business technical team leadership

Identification and origination of wind development opportunities

Project scoping, development strategy and bid formulation

Technical team assembly, leadership and management

Wind resource assessment and meteorological science

Wind project micro-siting, project design and output modeling

Conducting meetings with land owners, communities, Utilities, stakeholders, governmental agencies and tribes

Contract and agreement formulation, negotiation and execution

Technical writing and presentations

via WINData LLC.

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