Clean-Energy Tax Investment on Track to Set $14.8 Billion Record

  • Tax-equity investment to swell 13% from $13.1 billion in 2015
  • Deals slow in early 2016 after unexpected tax credit extension

Tax-equity investment in U.S. clean-energy projects is on track to exceed last year’s record $13.1 billion despite a tepid start this year.

After two key federal tax incentives were extended at the end of 2015, interest increased for tax-equity investing for wind- and solar-power developments this year, according to Nathan Serota, an analyst at Bloomberg New Energy Finance. BNEF expects as much as $14.8 billion in investment in 2016.

“As 2016 is going to be a record year for solar build and another strong year for wind build, with much of that of that commissioning toward the end of the year, we expect tax equity investment to rise in step,” Serota said in an e-mail.

Tax-equity financing was slow at the start of the year. Some investors had already committed funding, and many developers that had been racing to complete their projects by the end of 2016 -- the previous expiration of the credit -- slowed their efforts. The unexpected extension gives them more time to arrange financing and finish the projects.

Some investors expecting the 2016 sunset of the credit, including U.S. Bancorp, “overfunded” in 2015, according to Adam Altenhofen, a vice president of renewable energy investment originations at the Minneapolis-based bank. 

‘Recalibration’

“At the beginning of the year, there was a little recalibration,” Altenhofen said at the Renewable Energy Finance Forum-Wall Street conference in New York on Tuesday. U.S. Bancorp is a major provider and arranger of tax-equity deals, and expects to be busy this year. In such transactions, developers that have little or no income sell tax credits from clean-energy projects to investors -- usually banks and sometimes tech companies -- that apply them to their own tax bills.

A surge of projects seeking tax-equity investors is expected in the second half of the year, Jonathan Stark, a managing director at General Electric Co. unit GE Energy Financial Services, said at the conference.

“January was slow, February was a little better,” Keith Martin, a partner at Chadbourne & Parke LLP, said in an interview. The New York law firm helps arrange tax-equity deals. “But June has been gangbusters.”

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