Financing Wind: Industry hails policy tailwind

US onshore wind is poised for phenomenal growth this decade because of policies in the Biden administration’s Build Back Better Act.

That was the bullish sentiment in the ‘Onshore Wind in the Americas’ session at our Financing Wind North America virtual conference, which we hosted on Wednesday 10th November in partnership with headline sponsor UL.

There will be obstacles, such as difficulties in the tax equity market and long-standing problems with the grid. But our speakers said the unprecedented certainty for wind in Build Back Better would outweigh those challenges.

Democrats in the House of Representatives released the nearly 1,700-page act on 28th October. The act contains tax provisions worth an estimated $555bn for wind and other renewables; and, while it still needs to pass in both the House of Representatives and Senate, our speakers were upbeat.

The session was moderated by Michael Pantelogianis, co-head of power and infrastructure US, EU and UK at Investec.

Policy positivity

Susan Nickey, executive vice president and chief client officer at Hannon Armstrong, sits on the board of the American Clean Power Association and has been involved in wind’s policy lobbying work.

“We have in front of us something that we as an industry didn’t think was possible 6-12 months ago. We were talking about an environment where tax credits were winding down and we were preparing for that,” she said.

Nickey said the perception of renewables in Washington DC has transformed: “The industry has clout in Washington that we should today given where we are as the main power going forward, and we’re seeing in these bills, for the PTC and ITC [production tax credit and investment tax credit], is not a wind-down but a ten-year forward from start of construction and with direct pay.”

She said these would give an “enormous tailwind” to the industry, and the act could include an investment tax credit for standalone energy storage projects.

The act that was unveiled last month would include a five-year extension of the wind PTC for projects beginning construction before 1st January 2027; would apply for ten years after the start of construction; and would include ‘direct pay’, which means taxpayers otherwise eligible for the PTC could elect for direct payment of the credit amount.

Nickey said direct pay could be important in supporting long-term growth in wind. She highlighted that two-thirds of wind projects where construction started in 2020 were still in need of tax equity, and so direct pay could open new opportunities. But direct pay would also have conditions attached such as local content at projects.

Transmission and storage

Sandhya Ganapathy, global head of investments and M&A at EDP Renewables, said US wind has never been in a situation where it has policy visibility for ten years: “If this does get passed as it is currently envisioned, it would give huge impetus,” she said, and added that extra clarity is needed over how to improve electricity grids in the US.

Ganapathy also discussed the emergence of energy storage and its importance to EDPR’s future projects.

“As we think about the coming years, it is not something we can ignore,” she said, and explained EDPR would not be able to look at only purely wind or solar projects as it “needs to extract every additional dollar” from projects.

Yvette Dennis, senior vice president of infrastructure and project finance at AIG, said the industry would see more investment opportunities if Build Back Better is passed: “When tax credits are in place, it definitely helps foster development,” she said, but then added that the industry should plan for when tax credits are withdrawn.

In addition, she said the lack of coordinated policy to support transmission continues to be a problem for wind businesses.

“Some form of encouragement for the development of transmission is something that we see has been a persistent issue, and it really adds to the backlog of projects that are needing to be developed,” she argued.

Nancy Pelosi, Speaker of the House of Representatives, told the COP26 conference in Glasgow last week that Build Back Better act would pass in the House this week. A vote could happen as early as today. That would be a big step in passing legislation that is already getting US wind very excited.