Renewable Energy World Publishes PPA Analysis by Dan Sinaiko and John Marciano

Renewable Energy World has published the article “Why the 2018 Solar Tariffs and Tax Cuts Didn’t Kill Solar PPAs,” written by Dan Sinaiko and John Marciano, co-heads of Akin Gump’s global project finance practice. The article looks at why new tariffs on solar modules have not had the anticipated impact on power purchase agreements (PPAs).

Sinaiko and Marciano write that the Tax Cuts and Jobs Act’s new 21 percent tax rate was supposed to constrain the supply of tax benefits. Instead, “investors who find themselves short on tax liability have pivoted partially or wholly from consumers to aggregators.” While some investors, they say, “have increased commitment to acquiring tax benefits,” others “who had limited their role to syndicate participation have also begun sourcing their own deals directly with sponsors.”

The article then recounts the trade proceeding involving Suniva, in which the company asked the government to impose a 100 percent tariff on silicon cells and modules imported to the United States. Instead, the Trump administration announced a less damaging 30 percent tariff, with certain exclusions, though the World Trade Organization could still find that it violates international law.

The authors conclude that timing is crucial when it comes to the impact of tax reform and the Suniva tariff. It is difficult, they write, “to get offtakers to renegotiate their power purchase agreements as a general matter, particularly if there are other developers in the market that have stockpiles of non-tariffed equipment.” That said, “as long as there is demand for solar energy (whether due to carbon regulation or corporate social impetus) the solar industry should continue to survive, if not thrive.”

To read the full article, please click here.