One feature of the nearly $2 trillion Build Back Better bill that infrastructure managers really like is its renewable energy tax subsidy provisions.
Reuben Munger, Boulder, Colo.-based managing partner of $2.5 billion infrastructure manager Vision Ridge Partners LLC, said that aspect of the Build Back Better bill — included in the version passed by the House of Representatives on Nov. 19, — shifts how renewable energy tax subsidies are delivered.
Currently, renewable energy projects are paid for through tax equity financing controlled by a small group of banks that buy tax attributes of renewable energy projects but charge a fee and add requirements as to size and type of project the bank would finance, he explained. Many renewable energy projects including certain wind, solar, geothermal and carbon capture initiatives depend on tax subsidies but are hampered because they are not large enough to attract an investor base and so can't get funding through the tax equity market, Mr. Munger said.
Under the Build Back Better Act, the federal government would give developers the tax rebate in cash instead, he said.
Tom Osborne, New York-based executive director on the infrastructure team of IFM Investors, said that extension of tax credits for renewable energy in the Build Back Better Act would be "an important development."
"Importantly, the current draft also includes direct pay provisions allowing a broader range of investors to invest in the development of renewable energy because they could monetize the tax incentives rather than rely on the tax equity market that is not available to all developers today."
Added tax benefits could increase the number of renewable energy projects that get built because the tax benefits would allow developers to offer "an even more attractive price to the market or to companies signing power purchase contracts," said Keith Derman, a New York-based partner and co-head of infrastructure and power at the $282 billion Ares Management Corp.
"In the renewable space, when we think about wind and solar in particular; they are already at a low cost for power generation without tax benefits," Mr. Derman said. But giving tax benefits through Build Back Better would give them an even better advantage, he said.
