Obama Keeping up with Reduced Dependecy on Fossil Fuel

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Weekly Review3 Feb 2015
OBAMA BREAKS RANKS WITH SENATE OVER PTC 
In the last week Clean Energy Pipeline has tracked:
7 VC/PE deals worth $32.1m
13 M&A deals worth $2,785.2m
13 Project / Asset Finance deals worth $1,932.9m
2 Public Market deals worth $188.7m
View the weekly PDF report containing a full list of transactions we have tracked.
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The US government is again divided on the future of the Production Tax Credit (PTC) for wind energy, as new figures show that US onshore wind installations rose four-fold in 2014 following the expiry of the incentive at the end of 2013.
US President Barack Obama’s 2016 Budget proposal, which was unveiled yesterday, includes a plan to permanently extend the PTC, the main source of financial support in place for wind energy generation. The PTC was extended temporarily in December 2014, to be implemented retroactively throughout 2014. A longer-term extension of the PTC was rejected by the Senate last week, which voted 51-47 against a non-binding amendment put forward by Senator Heidi Heitkamp to extend the PTC by five years. The tax credit was previously extended for one year under the fiscal cliff package in early 2013.
The wind energy PTC provides a subsidy of 2.3 cents per kilowatt-hour for the first 10 years of a project’s life. According to the American Wind Energy Association (AWEA), it has generated $125 billion of investment across the US to date. In his budget announcement on Monday, Obama also proposed to extend the Investment Tax Credit, which provides eligible investors in the solar sector with a 30% federal tax credit, and is due to expire on December 31, 2016.
The US President’s plan to reform America’s tax credit system is likely to be an uphill battle, as he will struggle to win over the Republican-controlled Congress. Republicans seized control of the Senate in the mid-term elections in November and have prioritised lowering the deficit – which according to Treasury figures fell to $483 billion in 2014.
US wind installations surge four-fold in 2014
Recent figures from AWEA show the US installed 4.85 GW of new wind generation capacity in 2014, more than four times the volume that came online in 2013. The increase was caused by the large number of projects that started construction in 2013. Although the PTC expired at the end of 2013, projects could still qualify if they had begun work of a significant nature or incurred 5% of costs by the deadline. AWEA argues that a multi-year extension would enable the industry to further lower costs. The total system levelised cost of wind energy (LCOE) has fallen significantly during the past decade and at the current cost of $80.3 per megawatt-hour is the cheapest of the non-dispatchable technologies in the US, according to the Energy Information Administration (EIA). The LCOE of onshore wind is even lower than the total LCOE of hydro, which comes in at $84.5 per MWh, according to the EIA.

Obama’s proposal to extend the PTC permanently forms part of a bold $4 trillion budget package largely aimed at bolstering national infrastructure. If adopted, a permanent PTC extension would have the potential to mitigate fluctuations in wind energy installations caused by the perennial uncertainty surrounding the fate of the PTC each year. However, many in the wind industry believe that cost reductions in onshore wind will eventually enable it to compete in a subsidy-free environment.

SunEdison more than doubles PTC-eligible projects to 2.6 GW
Last week SunEdison and its YieldCo TerraForm Power completed the $2.4 billion acquisition of Boston-based renewable energy project developer First Wind. The transaction more than doubled SunEdison’s volume of PTC-eligible wind projects from 1 GW to 2.6 GW.
The deal saw TerraForm acquire 500 MW of operational wind power plants and 21 MW of solar plants, which brought the average life of its power purchase contract to 16 years. In addition, it added 8 GW of development-stage projects, including 1 GW of PTC-eligible wind assets, and a 600 MW solar project pipeline.
The purchase of First Wind will provide Terraform with $73 million of cash available for distribution (CAFD) this year. The YieldCo reiterated its 2015 CAFD guidance at $214 million.

 Culled from
Clean Energy Pipeline, a division of VB/Research © 2014. All Rights Reserved.

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