Tax Reforms Needed to Restart Green Energy Project Finance
To kick start the financing of green energy initiatives, first reform the tax structures that incentivize these developments, so say a growing number of industry specialists in The New York Times‘ Green Inc. blog this morning.
According to these specialists, what’s needed is a tax equity that is refundable, instead of one that is pegged to a green developer’s profits, as is the case now.
The reality is that green energy companies don’t even have the profits required to benefit from the current fiscal incentives. As a result, many have instead turned to banks, which have heavily invested in green energy via tax equity structures – basically, the banks provide project financing in exchange for the tax credit.
But with the ongoing financial crisis, that tried and true financing route has all but dried up.
International law firm Chadbourne & Parke cites that over the past two years, the number of renewable energy projects using these tax equity structures has fallen from eighteen to a mere four or five.
With a “refundable” tax structure, money from the tax credit would go directly to the green developers, thereby lessening the risk that green energy developers will share the recent fate of many investment banks.
Is everyone for this reform?
“There is some wariness in the market about relying on the Department of Energy to make refunds after the length of time it has taken D.O.E [Department of Energy] to get a federal loan guarantee program for energy projects off the ground,” notes Chadbourne & Parke project finance lawyers in a recent newsletter.
– For the full Green Inc. article via the New York Times click here
– For the Chadbourne & Parke newsletter click here
