US renewables investors see bill sparking gold rush

NEW YORK: For the first time, investors seeking to pour cash into US clean energy projects can count on at least a decade of generous federal subsidies, offering them longsought confidence in the staying power of the world’s third-biggest renewables market.

Tax credits for wind and solar projects have underpinned explosive growth in US installations over the last decade.

But they have often had short time horizons, leaving project developers scrambling to meet looming deadlines and spooking riskaverse investors.

The long-term tax credit commitments for wind and solar, wrapped up in a Us$430bil (RM1.9 trillion) bill passed by the US Senate on Sunday, were joined by new credits for energy storage, biogas and hydrogen.

Developers of wind and solar projects will also be able to get more support if they use Us-made equipment or build their projects in poorer areas.

“This is going to be a golden period of 10 years, at least,” said Keith Martin, an attorney with Norton Rose Fulbright who works on financing renewable energy projects.

“That is a long horizon for people to plan and really get this transition to clean energy into high gear.”

The US House of Representatives is expected to pass The Inflation Reduction Act soon, and president Joe Biden should sign it into law shortly after that.

Shares of renewable energy companies have soared since Senate Democrats announced a deal to pass the bill on July 27.

The Wilderhill Clean Energy Index is up 15% during that time. The index includes US market players like solar panel maker First Solar, residential solar company Sunpower Corp, renewable asset owner Brookfield Renewable and battery storage company Fluence Energy, among others.

Wind and solar accounted for just 12% of US electricity generation last year. But decarbonising the nation’s electricity sector by 2035, as the Biden administration has pledged to do, will require far more.

Renewable energy investment hit Us$215bil (Rm958.2bil) in the United States in 2021, according to the International Energy Agency, lagging China and Europe.

Investors, project developers, bankers and lawyers said the Inflation Reduction Act will drive a step-change in demand from a broad range of investors.

To date, most renewable projects have been bankrolled by investors who take a stake in developments in exchange for the associated tax breaks, so-called tax-equity financing.