Green-Energy Companies Hope for Renewal of Tax Credit, National Plan After Election

Source: By Kristin Broughton, Wall Street Journal • Posted: Sunday, November 1, 2020

Finance chiefs say extending investment-tax credits for renewable energy is a priority

SunPower Corp. equipment technicians at the solar-panel company’s manufacturing plant in Hillsboro, Ore. SunPower CFO Manavendra Sial says renewable-energy tax credits have been a significant catalyst for demand in the industry. Photo: steve dipaola/Reuters

Chief financial officers manage their balance sheets through the red and blue political waves in the nation’s capital. Regardless of the election outcome next week, clean-energy CFOs say broader economic trends—including a rise in corporate sustainability pledges and socially conscious investing, and a decline in renewable-energy production costs—have all been good for business.

Still, a Democratic win could be a boon, these executives said. On the industry’s wish list: prompt renewal of alternative-energy investment tax credits, removal of tariffs on solar technologies and, more broadly, the establishment of a national clean-energy plan, among other proposals.

“I think there’s an expectation that investment levels will be higher with a national administration that’s more supportive of growth in our sector,” said Gregory Wetstone, chief executive of American Council on Renewable Energy, a nonprofit.

Share prices in renewable-energy companies have increased in recent months in anticipation of a Democratic victory. The WilderHill Clean Energy Index, which tracks renewable-energy stocks, has climbed steadily since the spring, rising over the past month amid a broader market selloff.

Paul Middleton, CFO of Plug Power Inc. Photo: Plug Power Inc.

Paul Middleton, CFO of Plug Power Inc.,a hydrogen fuel-cell company in Latham, N.Y., said extending the investment-tax credit for renewable energy and making it refundable would have the biggest impact on his business. Plug Power makes fuel cells that are primarily used to power forklifts inside of commercial warehouses and manufacturing centers. Its largest customers include Amazon.com Inc. and Walmart Inc.

Plug Power, like other energy companies, uses its tax credits to attract capital. One way the company does that is by making deals with commercial banks to buy its equipment. The banks in turn claim the tax credits and lease the equipment back to Plug Power or one of its customers.

The tax-credit market, however, has faced challenges in recent months. Banks have less of a need for the credits because their taxable income has taken a hit during the pandemic, executives said. Additionally, the credits, which Congress last renewed in 2015 for solar energy and in 2018 for other renewable technology, began a multiyear step-down period that lowers the amount companies can claim to 26% of eligible expenses instead of the original 30% rate.

“Reinstating that back to the 30% level, and making it a longer period, if not permanent—that obviously would be helpful,” Mr. Middleton said.

The tax credits have been renewed in recent years as part of broader spending bills that have attracted bipartisan support. It is likely that their renewal would be fast-tracked if Democrats control the White House and Congress, executives said.

Renewable-energy companies have their eye on other Democratic proposals that could boost the industry, including incentives for electric-vehicle charging stations and energy storage, said Ben Kallo, an analyst with Robert W. Baird & Co.

Manavendra Sial, CFO at SunPower Corp. Photo: Courtesy of SunPower Corp.

Manavendra Sial, CFO at solar-panel company SunPower Corp. , said he has incorporated possible election outcomes into his financial-scenario planning. The renewable-energy tax credits, which he supports extending, have been a significant catalyst for demand in the industry, he said.

Tariffs imposed in January 2018 by the Trump administration on solar panels initially affected SunPower. The company worked with the administration and gained an exemption for some of its technology later that year.

“As we think about the administration in the White House come November, we will work with them, as we have done for several decades…on several catalysts for the industry,” Mr. Sial said.

Write to Kristin Broughton at Kristin.Broughton@wsj.com