The biggest changes to the U.S. tax system in decades went into effect on January 1st after the President signed the tax reform bill just before Christmas. The legislation will have varied implications for the energy sector:
- Utilities will likely see increased
savings due to:
- the lower corporate tax rate,
- a federal income tax deduction on interest expense and state and local taxes, and
- continued normalization rules for regulated utilities.
- Fossil fuel companies, which will pay less under the new corporate tax rate, viewed the bill as a win.
- The legislation opens up a section of Alaska's Arctic National Wildlife Refuge to oil and gas drilling.
- The bill did not include a continuation of nuclear tax credits for projects brought online after 2020, which could stall the Vogtle Nuclear Project in Georgia currently under construction.
- With regard to renewables, the legislation retained 80% of the value of the Investment Tax Credit and the Production Tax Credit. However, the final bill also includes the Base Erosion Anti-Abuse Tax (BEAT), which requires companies to make two calculations in assessing tax liability: 1) quantifying 10% of the company's taxable income, and 2) quantifying the company's tax liability while subtracting any tax credits. If #2 is less than #1, the company has to pay the balance. Since tax equity investments make up the majority of funding for renewable projects, the provision makes renewable investments less appealing to large, risk-averse companies and will ultimately lead to increased costs for clean energy projects.
- While the bill maintained the $7,500 tax credit for electric vehicles, it did not extend credits for other advanced energy technologies.
Energy & Sustainability Milestones
Energy and Sustainability related activities made headlines in 2017:
- For a few brief hours, over 50% of the energy supply for an area covering 14 Southwestern states was met by wind energy – a new record for wind penetration.
- For the first time, the United States generated an all-time high of 10% of its power from renewable energy.
- The Department of Energy reported that solar jobs are growing 17 times faster than the rest of the American economy and that the solar industry now employs twice as many people as the coal industry.
- GE announced plans to build the United States' largest wind farm, to go online in 2020.
- Mercom Capital Group reported that in the first half of 2017, over $1 billion in venture capital and private equity funding had been invested in battery storage, smart grid, and energy efficiency companies worldwide.
- Massachusetts joined the eight other states in the Regional Greenhouse Gas Initiative in announcing a plan to reduce carbon dioxide emissions by an additional 30% by 2030 relative to 2020 levels.
- The Department of Energy released new research showing that the solar industry in the United States had achieved the 2020 utility-scale solar cost target set by the SunShot Initiative, primarily due to rapid cost declines in solar photovoltaic hardware. The average price of utility-scale solar is now six cents per kilowatt-hour (kWh).
- Tesla announced the opening of Supercharger stations in downtown Boston and Chicago, representing the first step in the company's efforts to expand its electric vehicle charging network into urban areas. From January through August 2017, fully electric vehicle sales in the United States grew 47% over 2016.
- Reports confirmed that solar is the fastest growing source of power globally, accounting for almost two-thirds of net new energy capacity over the past year.
- For the seventh consecutive year, the American Council for an Energy-Efficient Economy named Massachusetts the most energy-efficient state in the country.
- The Northeast Clean Energy Council (NECEC), the nation's foremost clean energy advocacy group, recognized our own Tom Burton as one of the eight most influential clean energy industry leaders over the last decade at NECEC's 10th Annual Green Tie Gala.
- According to a report from the Precourt Institute for Energy at Stanford University, the global economy must triple its annual investment in low-emissions technology, from $750 billion per year between 2010 and 2015 to $2.3 trillion per year going forward until 2040, to keep the planet under two degrees Celsius warmer compared to pre-industrial levels.
- Google purchased 536 megawatts of wind power from four
different power plants, adding to the company's profile as the
biggest corporate purchaser of renewable energy. Though not all
projects are online, the acquisition means Google has agreed to buy
all of the power necessary to run its global operations on 100%
- Google purchased 536 megawatts of wind power from four different power plants, adding to the company's profile as the biggest corporate purchaser of renewable energy. Though not all projects are online, the acquisition means Google has agreed to buy all of the power necessary to run its global operations on 100% renewable energy.
Energy & Sustainability: Policy Developments
A handful of developments related to Energy and Sustainability emerged from Washington, D.C. in 2017:
- Texas Governor Rick Perry was confirmed as Energy Secretary, and Oklahoma Attorney General Scott Pruitt was confirmed as EPA Administrator.
- President Trump signed an executive order dismantling portions of President Obama's landmark climate change regulations. The order directs the agency to review and likely repeal the 2015 Clean Power Plan (111d), which requires existing power plans to reduce their greenhouse gas emissions, as well as the earlier Section 111(b) rule limiting GHG emissions from future power plants. It also lifts the year-old coal leasing moratorium, unravels EPA and Department of Interior regulations on methane emissions and fracking, and overturns guidance for incorporating climate change into federal projects and the social cost of carbon.
- President Trump announced that the United States would cease implementation of the Paris Climate Agreement, making it the only country in the world planning to opt out of the accord. In response, a number of U.S. states and cities announced their intention to go forward with implementation of the Paris Agreement goals, with California Governor Jerry Brown going so far as to sign an agreement between his state and China on reducing emissions.
- The Department of Energy released a comprehensive report on the reliability and resilience of the nation's electric grid and an overview of the evolution of energy markets. The study contains a series of recommendations from the department meant to inform and guide policymakers, regulators, and the public.
- The Department of Energy approved the Presidential permit for the proposed Northern Pass Transmission Line project, a 192-mile above and below ground, alternating and direct current transmission system that will deliver up to 1090 megawatts of low-emission hydropower from Quebec, Canada to Deerfield, New Hampshire. The project is estimated to provide more than $600 million in annual energy cost savings for New England customers.
- January 2018:
- Following months of speculation, on January 23, 2018, the Trump Administration issued a Proclamation announcing new tariffs on imported solar cells and modules (the "Solar Tariff") in response to the Section 201 petition brought by Suniva and SolarWorld Americas. The four-year Solar Tariff becomes effective on February 7, 2018, and will start at 30% in Year 1 and ramp down by 5% annually. The Solar Tariff exempts the first 2.5 GW of solar cells (not modules) imported each year. Although a tariff of any kind will impact some number of economically marginal projects, it is less clear how significantly the Solar Tariff will impact the U.S. solar market as a whole and whether those impacts will be felt equally across industry segments. Read this blog post by Mintz Levin's Eric Macaux for a comprehensive overview of the tariff and its projected impact.
Energy & Sustainability: Notable Deals and Financial Activities
Headlined by the sales of EnerNoc and Aclara, as well as SunEdison's bankruptcy, financial activities in the cleantech space varied widely this year. Here are a handful of highlights, with a concerted focus on companies with business ties to the United States:
- Demand Energy, a developer and operator of energy storage systems and software, was acquired by Italian utility Enel for an undisclosed amount.
- EDF Renewable Energy, a developer of large-scale wind and solar projects, announced the creation of Distributed Electricity and Storage, a new business unit to help the company make a foray into the distributed energy arena.
- SolBright Renewable Energy, a provider of renewable energy design and development services, was acquired by Arkados Group for $15 million.
- EnerNoc, a Boston-based firm helping companies manage their energy use, was acquired by Italian energy company Enel for more than $300 million.
- SunEdison Inc., formerly the world's largest renewable energy firm, won approval for a final bankruptcy plan that will leave shareholders with nothing.
- Verde Energy, a renewable energy supplier, was acquired by Spark Energy for $85.8 million.
- Siemens and The AES Corporation announced their agreement to form a new global energy storage technology and services company under the name Fluence.
- Verengo Solar, a provider of residential solar power systems, was acquired by Crius Energy Trust for $11.9 million.
- MP2 Energy LLC, an energy leader in demand response solutions, was acquired by Shell Energy North America.
- In a transaction valued at $830 million, Itron announced its plans to acquire Silver Spring Networks, resulting in the merger of the country's two major smart meter and grid networking players.
- Inevit, a developer of rechargeable
battery modules created to design power systems for electric
vehicles, was acquired by SF Motors for $33 million.
- Inevit, a developer of rechargeable battery modules created to design power systems for electric vehicles, was acquired by SF Motors for $33 million.
- Calmac, a company that builds and manages the biggest ice-based energy storage systems in the United States, was acquired by Trane.
- Aclara Technologies LLC, a smart metering and utility software provider, entered into a definitive agreement to be sold to Hubbell Incorporated for $1.1 billion.
- BP invested $200 million in Lightsource, Europe's biggest solar developer.
- With Mintz Levin representing Greentech Capital as a financial advisor to the transaction, Brookfield Renewable Partners closed its acquisition of 100% of TerraForm Global for a total net investment of $750 million.
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