The Likelihood Of Tax Reform in 2017 Puts Pressure On Clean Energy Posted on Jan 31, 2017
The GOP and White House are both promising tax reform soon. The reforms expected are cuts in corporate taxes and rules preventing companies from recovering costs from imported goods and services. Both of these reforms could have major impacts on renewable energy developers down the line of the supply chain given the amount of solar panels, wind turbines and other renewable energy manufactured outside of the U.S.
The expectation of these tax reforms is already having a huge impact on the renewable energy industry in the form of a tightening of the tax equity supply and stricter requirements on developers by investors. Just ten or so years ago, it was the lack of available financing that seemed to be holding back the renewable energy industry. It was the creativity of business leaders and legal experts in the renewable energy industry that led to the plethora of available third-party ownership and financing structures now available in the market. There was $11 billion in tax equity financing available last year for wind and solar project.
Due to the looming tax reform impact on the renewable energy industry, it is expected that developers will be trying to speed up timelines for their projects, less financing will be available for projects, and there will be a consolidation of developers and early-stage developers flipping projects sooner. All this will mean a tightening of the market for those businesses downstream as well.
Now is the time more than ever for companies in the renewable energy industry to cut costs where they can and maximize their profit margins.