2021 Omnibus Spending Bill Extends Renewable Energy Tax Credit

2021 Omnibus Spending Bill Extends Renewable Energy Tax Credit

Clean energy got a boost in the $1.4 trillion 2021 Omnibus Appropriations Bill that Congress passed on December 21. Highlights include an extension of the renewable energy tax credit and the production tax credit. In addition, $35 billion has been committed to energy research and development programs. The president signed the bill into law on December 27.

Renewable Energy Tax Credit Extension 

Congress extended the Renewable Energy Tax Credit for solar projects for two-years. The extension allows the current 26% credit to continue for projects that begin construction before the end of 2022, rather than 2020 as they would have under existing law. The RETC will fall to 22% for projects that begin construction by the end of 2023. It falls to 10% after that. The extension effectively supports solar growth through 2025, as developers can utilize “safe-harbor” provisions to fund projects with higher credit rates.

The extensions provide welcome relief for renewable energy industries that have experienced COVID-related disruption in 2020. Supply-chain delays, work stoppages, and capital and customer unsettling impacted the pace of development. In addition to current financial benefits, the extensions also give clean energy industries better posture for further policy support from the incoming Biden administration.

Production Tax Credit Extension

The Bill also provides for a 1-year extension of the Production Tax Credit for wind power projects. The PTC, typically claimed by onshore developers, will remain at 60% for projects that begin construction by the end of 2021. Previously, the PTC would have reduced to 40% for 2021. For offshore wind projects, the Bill allows continuation of the 30% ITC for projects that begin construction through 2025. 

Clean Energy RD&D Programs

The energy research, development and demonstration (RD&D) funding in the Bill is reportedly the first major energy legislation passed in a decade.The Bill contains about $35 billion in funding over the next five years across Energy Department programs.

Included among the identified priorities are programs to improve clean energy efficiency and cost-effectiveness, boost manufacturing and recycling, and better integrate renewable power into the transmission and distribution grids. Along with these RD&D funds, the Bill directs the Department of the Interior to set a target of at least 25 gigawatts of solar, wind and geothermal production on public lands by 2025.

Additional funding is being committed to research and commercialization of energy storage technologies, grid modernization, cybersecurity, carbon capture and emissions reduction, and nuclear research and modernization.

Conclusion

The benefits for the clean energy industry in the 2021 budget bill are significant, even if not all of the asked-for provisions were included. “Direct pay,” for example, which would have converted tax credits into direct payments from the federal government, were excluded. Nevertheless, the considerations allowed to clean energy position the industry for continued growth and portend further constructive dialogue with the Biden administration. In addition, we expect clean energy investor and developer confidence to increase with the extensions. For information about available solar tax credit projects, contact Windmill Capital Management,

References:

https://www.ncsl.org/ncsl-in-dc/publications-and-resources/fy-2021-omnibus-appropriations-bill.aspx

https://appropriations.house.gov/news/press-releases/house-passes-omnibus-appropriations-and-coronavirus-relief-package

Solar Project Financing Structure Comparison for Tax Equity Investors

Solar Project Financing Structure Comparison for Tax Equity Investors

By far the most common financing structure we see for solar tax equity is the power purchase agreement (PPA). That appears to be changing, however, as solar leases become more common. Though there is ample information available to solar customers about how various financing options compare, solar tax equity investors should also take time to… Continue Reading

Clean Energy for Data Center Growth

Clean Energy for Data Center Growth

A recently published report from Research and Markets highlights the opportunities for clean energy in data center growth over the next five years. The report, available at ResearchAndMarkets.com, estimates that global data center capacity is projected to grow at a compound annual growth rate of more than 25.5% through 2025. The report, entitled “Data Center… Continue Reading

The Trend Toward Cash-Flow-Driven Investments

The Trend Toward Cash-Flow-Driven Investments

As discussed in a recent article published in Real Assets Adviser, high net worth and family office investors are increasing portfolio allocations to cash flow investments. These cohorts join institutional investors in this shift, which benefits infrastructure and real estate asset classes. We have written frequently about the market drivers increasing the appeal of cash… Continue Reading

Cogeneration Up Close

Cogeneration Up Close

Sometimes we get so caught up in the details of clean energy project finance and investment that we take for granted how cool these systems really are. But we ran into a website recently that reminded us what we’re missing when we’re “down in the weeds.” www.untappedcities.com is a site that “unearths New York City’s most unique… Continue Reading

Clean Energy and Cannabis Linked by New Illinois Regulations

Clean Energy and Cannabis Linked by New Illinois Regulations

The State of Illinios recently enacted regulations that require medical and recreational cannabis producers to meet strict energy and water usage limitations. As a result of these regulations, clean energy and cannabis will be linked inextricably in the state. Windmill Capital Management first wrote about the benefits of distributed clean energy resources, particularly cogeneration, for… Continue Reading