Tbli by daniel a. spritzer


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TBLI CONFERENCE™ is the prime annual global networking and learning event on Environment, Social, Governance (ESG) and Impact Investing.

Monday and Tuesday, June 17-18, 2013

Paul Rose
Vice President of the Royal Geographical Society
Richard L. Kauffman
Chairman for Energy Policy and Finance for the State of New York - Governor of New York's Office and Cabinet - United States of America
Martin Rapaport is chairman of the Rapaport Group and founder of the Rapaport Diamond Report

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Tbli by daniel a. spritzer

  1. 1. Moving Sustainable Energy Projects Forward in Uncertain Times Daniel A. Spitzer Hodgson Russ LLP www.hodgsonruss.com
  2. 2. © 2013 Hodgson Russ LLP 2 Introduction  There are two main challenges facing renewable energy projects. First, is simply cost; entrenched fossil fuels provide more energy for the money  This is largely because fossil fuel cost do include “externalities,” thus prices due not reflect the true cost of pollution
  3. 3. © 2013 Hodgson Russ LLP 3 The Shale Gas Boom  The Shale Gas Boom has reduced fossil fuel cost, making it harder to compete, just as a number of subsidies are being reduced.
  4. 4. © 2013 Hodgson Russ LLP 4
  5. 5. © 2013 Hodgson Russ LLP 5 The Cost of Uncertainty  Former AWEA Exec, “Under relatively stable policy from 2007 to 2012, the wind industry was able to increase its domestic manufacturing of components to nearly 70 percent and reduce the cost to produce a kilowatt hour of wind energy by 50 percent. This is incredible. However, we saw the industry nearly shut down in 2012 as Congress struggled and failed to extend the production tax credit. This has stalled further progress to drive the cost of energy lower.”  Interview in Fierce Energy, 3/27/13
  6. 6. National Energy Policy  Let’s start by examining our national energy policy, which has been a bipartisan priority since the 1973 Oil Embargo © 2013 Hodgson Russ LLP 6
  7. 7. © 2013 Hodgson Russ LLP 7 Is Energy Change Coming? US pet food companies spent more on R&D last year than US utilities did.
  8. 8. © 2013 Hodgson Russ LLP 8 National Energy Policy So what can be done to improve the situation, given the unlikelihood of a national cap and trade law, carbon tax, or renewable portfolio standard? First, level the playing field
  9. 9. Leveling the Playing Field  “Federal support for renewable energy today comes primarily in the form of tax credits and accelerated depreciation rates. Both tools, however, can only be “monetized” by a tiny fraction of the investment community and therefore cannot leverage broad-scale investment that would increase competition among investors and thereby cut capital costs for renewable power projects. © 2013 Hodgson Russ LLP 9
  10. 10. Leveling the Playing Field  “Only a few dozen investors with hefty tax bills to offset, such as big banks and a handful of highly profitable companies, can benefit from these federal tax breaks. This requirement for tax liability has sidelined many interested investors who lack such “tax equity,” including tax-exempt pension funds, sovereign wealth funds, and, importantly, millions of retail investors who trade stocks”  Brookings Institute, November 2012 Report © 2013 Hodgson Russ LLP 10
  11. 11. © 2013 Hodgson Russ LLP 11 Give Renewables Equal Access to Preferred Structures  Master Lease Partnerships, a business form combining the tax advantages of a partnership (pass through taxation), with the liquidity of a publicly-traded company.  But they are limited to certain types of activities, such as oil and gas exploration
  12. 12. © 2013 Hodgson Russ LLP 12 Give Renewables Equal Access to Preferred Structures  Master Lease Partnerships Parity Act (S. 3275 in the Senate and a companion bill H.R. 6437) – A bipartisan effort to add renewables as an eligible activity, so they can attract capital in the same way oil, gas and coal do
  13. 13. © 2013 Hodgson Russ LLP 13 Give Renewables Equal Access to Preferred Structures  "MLPs carry the fund-raising advantages of a corporation: ownership interests are publicly traded and offer investors the liquidity, limited liability and dividends of classic corporations. Their market capitalization exceeds $350 billion. With average dividends of just 6 percent, these investment vehicles could substantially reduce the cost of financing renewables."  NY Times, June 2, 2012
  14. 14. REITs  REIT is a corporation that avoids double taxation because it can deduct distributions to shareholders, so it is only taxed on income it retains. There are certain prohibited transactions, including the sale of inventory, and the sale of electricity may be so categorized © 2013 Hodgson Russ LLP 14
  15. 15. REITs  REIT assets must pass a permanence test, not clear that PV panels or generators qualify. There have been some letter rulings supporting the use of REITs in renewable situations, but the Obama Administration can move its clean energy agenda forward by issuing a revenue ruling clearly stating procedures to set up renewable REITs, or supporting legislation © 2013 Hodgson Russ LLP 15
  16. 16. Tax Credit Certainty  Annual renewal of tax credits like Production Tax Credit hurt the industry. Set up a long term credit that phases out as grid parity is reached © 2013 Hodgson Russ LLP 16
  17. 17. Energy Efficiency  One of the few success stories of federal energy policy. © 2013 Hodgson Russ LLP 17
  18. 18. Energy Efficiency  Energy Savings and Industrial Competitiveness Act (Shaheen-‐Portman).  BUILDINGS  Strengthens national model building codes to make new homes and commercial buildings more energy efficient while working with states and private industry to make the code-‐writing process more transparent.  Creates a Commercial Building Energy Efficiency Financing Initiative. © 2013 Hodgson Russ LLP 18
  19. 19. Energy Efficiency  Energy Savings and Industrial Competitiveness Act (Shaheen-‐Portman).  MANUFACTURERS  Promotes research, development and commercialization of innovative energy efficient technology and processes for industrial application  Helps manufacturers reduce energy use and become more competitive by incentivizing the use of more energy efficient electric motors and transformers.  Establishes a DOE program – SupplySTAR -‐ to help make companies’ supply chains more efficient. © 2013 Hodgson Russ LLP 19
  20. 20. Energy Efficiency  FEDERAL GOVERNMENT  Requires the federal government – the single largest energy user in the country -‐-‐ to adopt energy saving techniques for computers, saving energy and taxpayer dollars.  Allows federal agencies to use existing funds to update plans for new federal buildings, using the most current building efficiency standards.  Clarifies that Energy Service Companies (ESCOs) and Utility Energy Service Contracts (UESCs) can be used by federal agencies to install electric and natural gas vehicle charging infrastructure, making it easier for agencies to use these types of vehicles. © 2013 Hodgson Russ LLP 20
  21. 21. © 2013 Hodgson Russ LLP 21 The Role of Government  “Princes . . . have frequently engaged in many other mercantile projects, and have been willing, like private persons, to mend their fortunes by becoming adventurers in the common branches of trade. They have scarce ever succeeded. Adam Smith, Wealth of Nations, Bk. V, Chap 2.7
  22. 22. © 2013 Hodgson Russ LLP 22 The Role of Government  Government must serves when it leads by establishing goals – consider the success of State RPSs – and incentivizes private business and fills gaps in the market
  23. 23. © 2013 Hodgson Russ LLP 23 Conclusion – Strong Medicine Needed  “The great flaw in the sustainable- business movement today is that few are willing to admit that achieving sustainability is difficult, and maybe impossible, without big changes in the way the world operates.” Auden Schendler, Getting Green Done
  24. 24. © 2013 Hodgson Russ LLP 24 Hodgson Russ LLP Daniel A, Spitzer, Esq. 716 848 1420 DSpitzer@Hodgsonruss.com