If you can’t model the tax incentives underpinning a solar project, it won’t get built.
The tax and spending package enacted last July phases out key federal solar and wind tax credits by the end of 2027. A patchwork of state and local incentives are determining winners and losers as renewables race to meet our extraordinary energy demands.
For most renewable projects, the tax incentives matter as much to deal structure as the underlying value of the completed facility—if not more. In the short term, we’re seeing a race to start and complete construction before the federal and/or state credits and incentives phase out. But afterward, we can see a pattern of potential winners and losers.
This isn’t to say renewable projects will halt in states that don’t incentivize them. The demand for energy is unlikely to subside any time soon and may actually increase. But projects in the losing states will almost certainly pass on additional costs to the end customers paying for electricity.
This article is an excerpt from a piece originally published on Bloomberg Tax. Read the full article here. (subscription required).