The Tax Equity Market: What Will Q4 2017 and Beyond Look Like?

CohnReznick’s Renewable Energy Industry Practice and CohnReznick Capital are pleased to release the latest issue of our U.S. Renewable Energy Brief, focusing on the constantly evolving tax equity market. 

As we approach fourth quarter, the renewable energy tax equity market is in a healthy state with over 45 active providers of tax equity and new investors frequently coming to market. Furthermore, those that have been in the market for some time are becoming increasingly comfortable with evolving project risks. Over $11 billion in tax equity investments were raised or committed in 2016.

Written in collaboration with Clean Energy Pipeline, a leading independent source of news, data, and analytics of the sector, this brief interviews key leaders and stakeholders in the industry to examine: 

• Distributed Generation (DG) Projects: Distributed Generation (DG) projects often struggle to secure tax equity, even when DG projects have an investment grade sponsor and offtaker. Certain steps can be taken to de-risk projects and present sponsors with a clear evaluation process in order to make DG projects more attractive to investments.
• Merchant Projects: Projects in merchant markets such as the Texas panhandle are notoriously difficult to finance, but tax equity investors have found avenues to success if there is a hedge agreement in place that provides investors with some certainty on the project’s cash flow.
• Corporate Purchase Power Agreements (PPAs): The number of projects with corporate PPAs, where a corporate entity is the power offtaker rather than a traditional utility, is increasing significantly. Tax equity investors are very interested in financing corporate PPA projects, as long as several considerations are well explored, including offtaker rating, basis differential risk and rights to project collateral.