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Key Takeaways | In the Room Where It Happened

by and | Aug 29, 2022 | , ,

On August 25, McDermott Will & Emery kicked off its latest 10-part weekly webinar series focused on navigating the new energy landscape following the enactment of the Inflation Reduction Act of 2022 (the Act)—the largest and most important climate action in US history.

During the first webinar, McDermott Partners Carl Fleming and Edward Zaelke hosted Greg Wetstone, president and CEO of the American Council on Renewable Energy (ACORE), for a discussion on the conversations leading up to this historic legislation and its future impact on the renewable energy industry.

Below are key takeaways from the discussion:

1. The Act represents a major win for the renewable energy industry, particularly its extension of tax credits up to a 10-year (or potentially longer) period, allowing businesses in the energy sector to plan on stable tax platforms for longer than a couple of years—something that is truly unprecedented for the renewables industry. Other major highlights include the introduction of tax credits for energy storage and new technologies, such as hydrogen, programs to encourage domestic manufacturing and the monetization of tax credits. The McDermott Energy & Project Finance team has already seen a spike in standalone energy storage mergers and acquisitions (M&A) activity and a heightened interest in financing structures.

2. Of further noteworthy importance is the Act’s introduction of the ability to transfer tax credits. Although the direct pay provisions of the Act were not as broad as hoped for by many, Greg believes that the transferability provisions will have a significant impact on the renewable energy market. In his view, the constraints on transferability are minimal and allow for the monetization of credits without partnership flips or sale-leasebacks, although there may still be a role for these types of transactions. According to Greg, the market will likely see a mix of tax equity structures and other kinds of financing as there is now more latitude as to how to monetize these credits. The Energy & Project Finance team is currently advising on a number of innovative structures to allow clients to capitalize on this new game changer for tax credits.

3. Another notable feature of the Act is the ability to stack credits related to domestic content, energy communities and wage and apprenticeship requirements. Although further regulations and guidance are needed in these areas, it is agreed amongst industry specialists that appropriately stacking these incentives could make renewable energy projects much more lucrative while creating beneficial societal impacts, such as building a domestic workforce and supply chain and transitioning away from fossil fuel-driven economies. The Energy & Project Finance team is working with various clients to narrow down such requirements and to help properly “stack” these credits.

4. Reducing greenhouse gas emissions was a true driving force behind the Act and is a meaningful step toward addressing climate issues. However, the devil will be in the details regarding how [...]

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The Energy Market in 2021: From Crisis to Opportunity | Tax Credit for Carbon Capture Products

by and | Apr 1, 2021 | , ,

The energy market has undergone significant change in the past 12 months, with even more on the horizon. Our webinar series explores how these changes have shaped—and will continue to impact—the energy industry, including discussions of what’s to come.

Our latest webinar featured FTI Consulting’s Ken Ditzel, Senior Managing Director and Fengrong Li, Managing Director, who are both in the Economic and Financial Consulting Practice.


Below are key takeaways from the webinar:

  1. The carbon capture and sequestration tax credit under section 45Q is an important source of predictable revenue for carbon capture projects. The section 45Q credit was substantially expanded in 2018 and is worth up to $50 per metric ton for carbon permanently sequestered and up to $35 per metric ton for carbon used as a tertiary injectant in connection with an enhanced oil or natural gas recovery project. Internal Revenue Service (IRS) guidance released last year and final regulations promulgated in January have provided more certainty for the market to move forward with carbon capture projects and claim the enhanced section 45Q credit.
  2. There are currently about 32 strong contender carbon capture projects in the US market. About half of the carbon capture projects are traditional power generation and another third of projects are ethanol projects. Deep saline formations represent almost 90% of carbon sequestration storage capacity with enhanced oil recovery representing most of the remaining storage capacity.
  3. Tax equity investors—including banks, financial institutions and energy companies—are closely monitoring and have expressed interest in carbon capture projects. To date, there are no closed transactions that include tax equity structures. Rather, project sponsors have claimed the section 45Q credit against their own tax liabilities. The recapture lookback period was reduced from five to three years in the final section 45Q regulations, which may encourage tax equity investments.

To access past webinars in this series and to begin receiving Energy updates, including invitations to the webinar series, please click here.



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The Energy Market in 2021: From Crisis to Opportunity | Reenergizing after the Storm

by and | Mar 22, 2021 | , , , ,

The energy market has undergone significant change in the past 12 months, with even more on the horizon. Our webinar series explores how these changes have shaped—and will continue to impact—the energy industry, including discussions of what’s to come.

Our latest webinar featured FTI Consulting’s Chris LeWand, Global Power & Renewables Leader and RJ Arsenault, Managing Director in the Clean Energy Industry Practice.

Below are key takeaways from the webinar:

  1. Project valuations will be impacted in both the short- and medium-term, but how much they are impacted depends on which side of the table they are on. Larger sponsors with the balance sheet to handle this issue will likely play this out and address these issues via the existing waterfall. However, smaller sponsors without the balance sheet will have to soon deal with hedge providers, debt and tax equity, each of which now find themselves in new positions within the capital stack.
  2. The lack of utility Power Purchase Agreements (PPAs) are both at the front and back of this. The lack of PPAs in Texas resulted in many developers going out and securing these hedge products in the merchant market at a high price. While effective at the time, we now see the downside of that pervasive structure in extreme weather events. So, we may see a rethinking of the PPA market in Texas as a result of this event and new means of securing offtake going forward.
  3. As far as how the market in Texas will react, things are temporarily slowing down or hitting the pause button when it comes to development, debt and tax equity. There is now a lot going on in Texas in terms of litigation, resignations and political oversight in addition to standard course project development and financing. While due diligence has always been heavy for these types of transactions, it will now get even heavier. Projects will take longer and be a little more costly to transact upon. This is not insurmountable, as most debt and tax equity providers are always evolving in their diligence requirements, and this can be viewed as a natural progression in a way to find solutions.

To access past webinars in this series and to begin receiving Energy updates, including invitations to the webinar series, please click here.



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Five Takeaways: Utility Acquisition of Renewable Projects – A Discussion of the Legal and Tax Issues Regarding Utilities, Developers and Tax Equity

by , , , , , and | Dec 4, 2020 | , , ,

Increasingly, utilities are replacing older generation fleets with more cost-effective generation technologies. Renewables are cost-competitive alternatives in this effort for a number of reasons, including the current tax incentives. A utility’s acquisition of a renewable asset presents many issues not otherwise present in a non-utility acquisition, particularly if the utility intends to include its investment in rate base.

In our webinar, we discussed the legal and tax issues associated with renewable energy transactions based on our experience representing both utilities and developers.


Below are key takeaways from this week’s webinar:

  1. 2021 will bring an increase for the renewable energy industry, despite the effect COVID-19 has had on the market.
  2. Some issues to consider when creating a tax equity structure that involves a utility are: regulatory investment limitations, related party and normalization considerations.
  3. Utility build-transfer agreements should be executed well in advance of the notice to proceed. These agreements usually involve classic mergers & acquisitions (M&A) representations and warranties that are made in advance of the project beginning.
  4. Developers under a build-transfer agreement should consider ways to mitigate risk.
  5. Timeline is important. A utility will commonly use the interim period between entering into a build-transfer agreement and closing the transaction, to complete tax equity documents and make certain representations and warranties to the tax equity investor.

To begin receiving Energy updates, including invitations to the webinar series, please click here.

Access past webinars in this series.



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