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U.S. Renewable Energy Brief: The Tax Equity Investment Landscape

U.S. Renewable Energy Brief: The Tax Equity Investment Landscape

Full Title: U.S. Renewable Energy Brief: The Tax Equity Investment Landscape
Publisher(s): Cohn Reznick LLP
Publication Date: September 1, 2017
Full Text: Download Resource
Description (excerpt):

Welcome to the fifth edition of US Renewable Energy Brief. As we begin to wrap up the summer, we are pleased to report that the renewables tax equity and debt market is in an extremely healthy state. There are now over 45 active providers of tax equity, and new investors continue to enter the market. Furthermore, those that have been in the market for some time are becoming increasingly comfortable with the evolving project risks. This improving competitive landscape is resulting in target tax equity yields declining and converging with debt spreads.

And while there was a decrease in tax equity investment volumes last year – J.P. Morgan estimates $11bn was raised or committed in 2016
compared with around $13bn in 2015 – investment was higher than the $10bn invested in 2014 and significantly higher than the $6.5bn raised or committed in 2013.

We are optimistic that the material influx of new investors will provide a better balance, such that the overall volume is not just 3-5 investors, which will mitigate macroeconomic risks if we were to see another downturn like 2009.

We are also optimistic that more investors will partake in smaller DG and utility projects as well as portfolios, where there has historically been a shortfall of tax equity appetite.

Then, there is the situation in Washington. Increased investors will mitigate the impact of the tax rate reduction. The increasingly resilient tax equity market has been powering through tax reform uncertainty with only a select few on the sideline
waiting for more clarity.

This report explores these themes through a series of interviews with senior market participants. It also provides an update on developments in tax equity structures and pricing.

We hope you find this newsletter thought provoking and insightful as we begin a busy 4th quarter. As always, we welcome your feedback.

All statements and/or propositions in discussion prompts are meant exclusively to stimulate discussion and do not represent the views of, its Partners, Topic Directors or Experts, nor of any individual or organization. Comments by and opinions of Expert participants are their own.

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