Tax reform isn’t passed yet but the language is basically done. As I tweeted yesterday (follow me @YannBrandt) there is a solar victory lap happening right now. It’s not deserved given what we are up against and while I and most in solar expect SEIA to be in charge of this, I also ask you to look in the mirror. We are all a bit apathetic, less so recently, but unless the job is to do policy, few other solar folks get involved. Maybe these are tough words, but we all need to do a bit more, myself included. In the meantime, stay up to date by subscribing to EnergyWakeup and make sure your colleagues are subscribed to this newsletter. On to the news.
10/10/10. Before we get to the news, start thinking about what your company is doing for policy. I agree that it needs to be easier for you, easier to give what is needed, easier to make the calls you want to make and easier to meet with your legislator. That’s on us – the people that think about this full time. Your job is to execute on the tasks that keep your company growing and profitable. Policy isn’t just about creating a market, its about eliminating the market delays/uncertainties and reducing margin pressures enacted by incumbent utilities. In the new year, I and some other folks will be rolling out the 10/10/10 plan and expect your participation. 10 hours (at least) of policy outreach per employee, $0.10 an hour ($4 per week) per employee and $10/kW going towards a solar policy PAC. A 2MW per year company with 10 employees should be able to provide 100 hours of policy outreach and $22,208 in policy budget. If your company can’t, then I assure you that policy isn’t your company’s biggest problem. More to come – just remember 10/10/10.
BEAT It Back. As we outlined in our tax reform discussion last week, BEAT had to be in the bill to stop offshore capital from staying offshore but it had an unintended consequence in punishing tax equity investors. The pushback shows the power of large scale renewables, looking at Cornyn (TX) and Grassley (IA) comments and groups like NextEra that really focus on the multinational investors. It’s a win but don’t get too excited because a good chance that this didn’t impact you as much as…
The Corporate Rate. Have you plugged 21% into your model yet? Depreciation gets hit and you started to think about showing an after tax IRR, not a pre-tax after tax benefits IRR like we’ve done for years. In other words, we are selling tax exempt muni bonds now. The cash flow also regains some value (crazy statement). But most of all, about 40% of the tax equity market is gone because the total liability is going from 35% to 21% (broad statement) and your cash customers owe less to the IRS. I’ll be looking into how companies use the lower rate for things like inverted leases to shield EPC revenues in some cost-basis appraisal situations. I do expect to see more foreign capital flowing into projects with this tax reform given the lower taxation on the cash flows and low cash yields in other economies.
White House Docs. Someone in the White House leaked this document to the reporters at Politico and it doesn’t read well for solar with regard to the 201 case. It could be a way to signal the parties to find a way to a settlement and it could be a test to see if the public has a backlash to the idea of solar tariffs. You should be calling your local TV news and telling them to report on this because I doubt this bubbles anywhere near the other things being talked about on national TV and that’s bad for solar. The 201 process and how it has evolved shows how much more influence our industry needs to get.
BP Goes Solar. BP took 10% of its last quarters profits and bought 43% of one of Europe’s largest developers. If your market is putting fuel into transportation and transportation is becoming electrified, you better think of a way to defend yourself. This isn’t the first oil company in solar and it won’t be the last. Expect more.
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- New York Times: Tax Bill Largely Preserves Incentives for Wind and Solar Power
- Politico: U.S. setting stage for solar trade war with China
- CleanTechnica: Who Saved US Electric Vehicle, Solar Energy, & Wind Energy Tax Credits?
- EnergyWakeup: Engie Executive Sees End Of Coal, Gas & Nuclear Power – Interview with Thierry Lepercq
- Renewable Energy World: Eight Great Women in the Business and Science of Solar
- Greentech Media: Stories That Defined the Global Energy Storage Market in 2017
- Telegraph: BP returns to solar with £200m Lightsource deal
- PV-Magazine: Montana lawsuit hopes to halt cuts to the rates paid to IPPs
Opinion
Have a great day!
Yann