Trump insider: New administration won’t attack renewable energy
There has been a lot of angst in the renewable power sector over what the Trump presidency will mean, but according to a Trump insider, renewable energy will not be in the new president’s sights when he takes office in January.
The day after the election, shares of solar power companies like SolarCity, SunPower and Vivint Solar cratered, as did wind turbine maker Vestas, while shares of coal company Peabody Energy jumped more than 50%. But those drastic movements may not prove to be an accurate reflection of the realities the energy sector will face under Trump’s presidency.
“Energy is not one of the top five agenda items” on Trump’s to-do list when he takes office in January, according to a major Trump financial contributor who said he is a member of the transition team and spoke on the condition of anonymity.
The top issues on that agenda are tax reform, immigration, reforming health care (Obamacare), infrastructure, and trade.
“Everything with renewables continues; the credits will remain in place,” he said.
During his bid for the White House, Trump criticized solar power programs such as the Department of Energy’s loan to Solyndra and his presidential transition website includes no details on wind and solar policy.
But despite the campaign rhetoric, the momentum of power sector deal flow, which has come largely from renewable energy deals, is likely to continue, say market participants.
There have been two main drivers of renewable energy deals, says Dan Reicher, executive director of the Streyer-Taylor Center for Energy Policy and Finance at Stanford Law School. On the federal side, there are tax credits and accelerated depreciation. At the state level there are renewable portfolio standards.
Even with Congress in Republican hands after the election, it is unlikely there would be a move to repeal the production tax credit (PTC) for wind power or the investment tax credit (ITC) for solar power, Reicher said.
There is also a limited incentive to repeal either the PTC or the ITC as both were renewed in December on a stepped down basis with definitive expiration dates. The PTC is expiring by 2020 and the ITC will drop to 10% in 2021.
So, in addition to the benefit remaining in place, the step-down schedule is likely to provide an incentive for developers of wind projects in particular to push to close financing on their projects sooner rather than later. At the beginning of 2017, for instance, the PTC drops to 80%.
The most likely scenario from a finance perspective will be “business as usual,” said a partner in a fossil fuel development company, who believes the Trump Administration will be “energy friendly” and could eliminate some regulations that could aid the development of gas-fired generation.
Under Trump’s presidency he sees fewer roadblocks for the continued development of hydraulic fracturing and for new pipelines to get the fracked gas to consumers, such as new gas-fired generators, which would be a positive for development. But in terms of financing, that is “based on economics and doesn’t have anything to do with what administration is in power,” the developer said.
Among the economic factors that the Trump Administration could influence, though, are the tax credits. Some commentators have pointed out that the Trump Administration would not even have to engage in the heavy legislative lift required repeal the tax credits, instead the administration could work through the Internal Revenue Service to revise some of the rules that govern the credits, such as the definition of construction start, which is one of the eligibility milestones.
That could be possible in some draconian scenario, said the Trump insider, but “it is not going to happen.” The PTC cuts across party lines with Republican states such as Iowa reaping benefits from wind power development.
Tax reform, in fact, could have the largest near-term effect on financing power projects, particularly legislation that would broaden the scope of entities that can participate in master limited partnerships (MLPs).