Large Investors Likely to Back Clean Energy If Tax Professional Let Them Know About It

Recently, we’ve reported that institutional investors like pension funds and corporations are becoming important sources of capital for renewable energy projects.

Investors are increasingly appreciating the reliable, steady returns they can get by investing in a solar plant, for example, that’s got a signed contract to sell electricity to a utility for 20 years.

Buffet’s energy arm, Midamerican, found that out when its bond offering to finance a solar plant was wildly over-subscribed.

It turns out, however, that many of these potential investors don’t hear about this opportunity because tax professionals are generally unfamiliar with the various tax incentives available to private investors in clean energy projects.

Bloomberg conducted an online survey of subscribers to its BNA Tax and Accounting Center, and found that although 35% of respondents have made tax equity investments on behalf of clients in areas such as low-income housing, the majority weren’t aware they could also be made in clean energy.

65% of respondents said they were mostly or completely unfamiliar with incentives available to investors of US wind projects known as the Production Tax Credit (PTC).

Only 7% say they’re extremely familiar with the PTC, which was used to finance about 4,000 megawatts (MW) of wind capacity in 2011, or 70% of total US wind installations, concludes Bloomberg New Energy Finance.

"These results suggest an information disconnect," says Michael Liebreich, Bloomberg New Energy Finance CEO. "Tax equity investing today offers backers of clean energy projects, based on proven technologies, comparatively high risk-adjusted returns, given the current low interest-rate environment. Apparently though, many in the tax community have failed so far to spot the opportunity for their clients."

The US Department of Energy (DOE) hosted a meeting recently to inform chief financial officers and others from Fortune 500 companies about opportunities available to large corporations in clean energy tax equity investing.

This week the Senate voted down an amendment to the Transportation bill which would have extended the PTC for another year, instead of letting it expire at the end of 2012.

The boom and bust cycle for the PTC, approved for several years and then allowed to expire, has been holding back growth of the US renewable energy industry.

President Obama includes a permanent renewable energy PTC in his corporate tax reform plan.