Tag Archives: clean

How a Danish public guarantee facilitated an unexpected source of finance for a Swedish windfarm

September 16, 2013 |

 

Institutional investors, such as pension funds and insurance companies, hold a vast share of society’s wealth with over USD 71 trillion of assets under management. Despite being frequently cited as potential sources of large-scale investment for wind farms or solar plants, CPI recently found that barriers and management practices prevent all but a few institutional investors from actively engaging in renewable energy projects.

That’s why, when an institutional investor does engage in a renewable energy project, it is important to draw out lessons to understand what worked, what was needed to encourage their participation, and what potential exists to replicate and scale similar approaches.

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Supporting wind energy and saving U.S. taxpayers nearly $5 billion in three easy steps

December 18, 2012 |

 

CPI’s recent study, Supporting Renewables While Saving Taxpayers Money, showed that U.S. governments could save a lot of money by adjusting how tax incentives for renewable energy are delivered. In particular, we showed that a $21/MWh taxable cash incentive for production (TCP) for wind could provide the same support to wind projects as the current $22/MWh production tax credit (PTC) and almost halve the cost to federal and state governments.

US Government could save 4.5 billion by adjusting current wind policy

The PTC is set to expire at the end of this year. The Senate has proposed extending it by one year, but at a cost to government in excess of $12 billion – a heavy lift given budget constraints. Replacing the PTC with a TCP could reduce that cost to $7.5 billion. A similar reduction in cost would apply to any proposal to extend the PTC, including the recent proposal by the American Wind Energy Association to phase-out the PTC over six years.

How does this work?

Well, wind project developers have limited tax liabilities. That means that by themselves, most project developers can’t use federal tax benefits until years after they are received, eroding almost two thirds of the incentive value. In order to get more out of these incentives, project developers bring in outside investors who have greater tax liabilities. This is called tax-equity financing. However, tax equity financing is more expensive and complex than conventional finance, and erodes about a third of the incentive value.

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