Rob Freeman, the CEO of Tradewind Energy, recently spoke on the Tax Cuts and Jobs Act of 2017 in relation to the wind and solar industry. His excerpt from the article is posted below and you can read the full article by clicking here.
Lenexa Firm Survives Close Call with Tax Reform Negotiations
One area small business was keeping a close eye on recent negotiations leading to the Tax Cuts and Jobs Act of 2017.
Some early versions of the bill drafted by Congress were “super problematic” for the wind and solar industries, said Rob Freeman, CEO of Tradewind Energy in Lenexa. The suggested changes revolved around diminishing the value of Production Tax Credits, the industry’s primary investment tool, or eliminating them immediately.
Those changes would have been a big problem for Tradewind Energy, one of the largest wind and solar project development companies in the U.S.
“The fact that the House would basically say, OK, well, we’re going to just shut that program down after we all agreed that there was going to be a steady ramp down over five years is just unbelievable,” he said. “These are the same people who always talk about importance to business of having a stable regulatory and policy environment so you can run your business. So it just flew in the face of all that.”
In the end, the final bill resulted in no change to the previously negotiated phase out of the tax credits—those will still expire at the end of 2020.
But other parts of the bill have the potential to negatively impact the wind and solar industry, Freeman said. The flagship provision of the bill, the reduction of corporate taxes from 35 percent to 21 percent, damages the economics of wind projects, he said.
An important aspect of the economics of these projects is the depreciation, Freeman said, which has less value under a lower corporate tax rate. In order to hold project returns, prices may have to increase.
This is a tricky area that companies with pending transactions will have to navigate—for projects that are already bid or under construction, it may be difficult to decide what to do now that the return on investment won’t be the same as was expected.
“That has been the most difficult thing for the industry to react to—what is the end effect of the pricing of wind power, and are there ways to mitigate that? So the industry’s sort of been in a scramble trying to figure that out,” Freeman said.
But going forward, companies will know what to expect when planning a wind or solar project, Freeman said. And that will keep his company of 140 employees moving ahead.
“We’ll keep trucking along. Both Production Tax Credits and Investment Tax Credits (for solar projects) are going to ramp down over the next few years, but the industry is planning on that.
“Big picture, I think the industries will be OK.”