Scott Elias: Thanks for joining everyone. We’re going to get started in about a minute. Good afternoon. Happy Valentine’s Day, and welcome to today’s webinar, How is The Inflation Reduction Act affecting Clean Energy Developers? I am Scott Elias. I’m the Vice President of policy and market development at CleanCapital. I recently joined the CleanCapital team to lead our public policy engagement, overseeing our internal and external responses to legislative and regulatory policy changes in our target states. And I represent CleanCapital and trade associations policy forums and regulatory agencies to keep our team and our partners updated on impactful policy changes. And I want to thank you for joining us today. Today, approximately six months from the IRA’s passage, we have an opportunity to reflect on the first six months of the most ambitious climate law in our nation’s history, what the industry and federal agencies are still working on to implement it, and most importantly for most of you, what this all means for clean energy development. And today is a pretty good day to have this conversation because yesterday the Department of Treasury and Internal Revenue Service, in partnership with the Department of Energy, released initial guidance on the low-income communities bonus credit program, as well as initial guidance on an expanded advanced energy project credit program, which hopes to usher in a new era of clean energy manufacturing leadership in the United States. Just a couple final notes before we begin. First, this webinar is being recorded and will be available after the session concludes today. It will also be rebroadcasted as an episode of the Experts Only podcast. So look out for that and check out some of the other great conversations about clean energy, innovation, and finance on that podcast. And lastly, we recognize that a lot of IRA implementation and guidance is still being drafted. Some of it actually just came out less than 24 hours ago, and more guidance is expected in the coming days, weeks, and months. So everyone should understand that some of the panelists’ answers today are going to be guided by interactions they have had with government agencies and personnel, and the situation is evolving. But now let’s meet our experts. Today we are lucky to have IRA expert, Elizabeth Gore, who brings decades of experience working in Washington DC as senior vice president for political affairs at Environmental Defense Fund, where Elizabeth leads a team of lobbyists and advocates aimed at creating cleaner air and water, safer communities, healthier kids, and a livable planet. She also works with EDF’s partners across the political spectrum and works to take EDF policy goals and make them a reality. Our other panelist is tax expert Elizabeth Crouse, a partner at K&L Gates. Elizabeth Crouse provides business focused solutions for US, federal, state, and international tax problems in a variety of transactions and investment structures. Elizabeth works hand in hand with clients to create and implement practical and efficient international and domestic corporate structures, negotiate tax focus and tax informed provisions in a variety of contracts, and leads transactions, particularly in the renewable energy industries. And now I will turn things over to our moderator, co-founder and president of CleanCapital, Jon Powers. Jon Powers: Thanks so much, Scott. And thank you to all of our webinar participants today, as well as our Experts Only listeners, as this podcast is being distributed in a really timely fashion for an incredibly important topic. First I want to welcome everyone on Valentine’s Day, for those of us who love clean energy and hope to be celebrating it for decades to come. Before we dive into this really important topic, I just want to spend a second talking about CleanCapital and who we are. CleanCapital launched in 2015 with sort of a mission to bring a better cost of capital into the clean energy space to accelerate the deployment of projects. And also we developed a tech platform to help us underwrite assets really more efficiently. We’re driving forward to really address the urgent threat of climate change by trying to get more projects in the ground. Since launching, we’ve deployed over a billion dollars, have acquired over 400 megawatts in the DG space, and are really helping to lead the way in bringing efficiency into this space to continue to accelerate growth in the market that we so care about. Next slide. So what are we looking to do? A lot of folks know us originally as a private yield co buying up operating assets because that’s what we did for the first few years of our company. But now over the last two years we’ve really accelerated into construction. We are investing in early developers, which I’ll talk about more in a second, and we’re doing energy storage as well. We are even looking to be going beyond these asset classes down the road, but this is the area where we see a tremendous amount of opportunity in what I call the middle market, or we call the middle market. Not resi, not large scale utility, but things like community solar, as well as rooftops, commercial, industrial, MUSH market, et cetera. Next slide. We’re operating now in over 26 states, including Guam and Hawaii. We are on the way to be the largest developer in Alaska, which is super exciting. And what we really do is specialize in being able to look into these emerging markets, as well as the established markets, and be able to execute on bringing some of the smartest capital into those markets so we can continue to get more assets in the ground. Next slide. We’re currently looking really to grow some of our partnerships. So as I mentioned, we’re not just buying operating assets anymore, but we are looking to put rocket fuel into the industry. So we have worked, for instance, last year, we had a full acquisition of a firm called BQ Energy, which is doing solar on brown fields nationwide. We’ve made an minority investment in a firm in Alaska called Renewable IPP, and they’re really providing them the capital they need to grow their team, and to get more projects in the ground. For the firm in Minnesota, we put a convertible node in place to give them some capital to accelerate their growth and get more of their team working on the projects that they really want to focus on, as well as really startup developers who just need some bandwidth and support to get going. So we don’t want to just put our money where our mouth is. We’re also really looking to help developers with providing some shared services, things like marketing, as well as policy resources as they look to enter new markets and figure out the landscape. We’re very excited about what the future holds for clean energy, and intend to be one of the key players in helping to finance the solutions we need to solve climate change. But onto the topic at hand, as Scott mentioned with the announcements, yesterday, this is a very timely conversation, but a lot of folks in the webinar today don’t have the footprint in Washington to really track what’s happening. And so I’ve asked Elizabeth Crouse and Elizabeth Gore to join us to talk about not only what’s in the landmark legislation that passed last summer, but what’s being done today to execute and implement that. I think people obviously follow how the bill becomes a law, but really now the next work is the dirty work of getting this in place. I shouldn’t use the term dirty work, but the work to get this in place and executed. So this is going to be a series of segments. We’re going to start at a high level, get into specific parts of the legislation that focuses on developers as well as storage, and then open to Q&A. In this first segment, I’ve asked both of our speakers to talk a little bit about the overview of the legislation itself, the process to get it implemented, and some of the barriers. So I’m going to start with Elizabeth Gore. Elizabeth, we’re going to get into the tax portion of this with Elizabeth Crouse, but for those that are just coming up to speed on the IRA, can you just talk about the opportunity it provides for solving climate and what’s in it? Elizabeth Gore: Absolutely. And thanks for having me, Jon, and I want to welcome everybody to the Team Elizabeth show this afternoon. Back in August 2022, as Scott was just saying, about six months ago, Congress passed and the president signed the Inflation Reduction Act, which has hundreds of billions of dollars in it for energy security and climate provisions. And this is on top of the bipartisan infrastructure bill that had been signed last November, December that included tens of billions of dollars in pro-climate investments and transmission, electric charging stations, and resilience spending. So at EDF, we think about these two bills in tandem because many of the provisions work together. Because the IRA is so much bigger, most of my comments will focus there, but just keep in mind that both of these bills included impressive funding levels for climate related policies. So as I focus on the IRA, as Jon said, I want to give you a quick overview of some of the areas that we’re particularly focused on. I think one of the biggest challenges for this package is just the scale of it. It is a big bill with a lot of moving pieces. It’s got lots of money in it. I think I’m pretty familiar with it. And every now and then I still stumble across a provision that I didn’t know was in it. And the big amounts of money kind of skew our thinking. Back in the fall, I was talking to somebody about the USDA conservation provisions here, and this person was sad because it only had $20 billion. Now $20 billion is a lot of money for conservation. It’s just when you put it against the whole bill, it sometimes feels smaller. So let me talk about a couple of the key provisions. Tax provisions do make up the bulk of these investments, and they will result in the bulk of the emissions reductions. I’m going to set that aside and let my friend Elizabeth Crouse focus on those pieces. But just to keep in mind, that is really the backbone of this package. Some of the other areas that we at EDF are focused on that I had flagged for this gathering, one is the methane emissions reduction program, which charges a fee on certain methane emissions. This is the first time we’re putting a price on greenhouse gas emissions. And so this is an area where EDF is really focused. The second is the greenhouse gas reduction fund. This is still under development. We’re expecting some information as early as this week about what that might look like. It’s housed at EPA, and will likely be providing funds to both community CDFIs and state green banks, and with other grant and loan guarantee programs. So that is still a bit a work in progress, but we think has the opportunity to really jumpstart some additional investments that can be leveraged. There are grants to EJ communities which address areas that are overburdened with pollution, really important in today’s landscape. And then there’s also, of course, investments in manufacturing that we’ll be talking about later in the conversation. In terms of process, agencies are frantically working to implement the provisions of this package. Includes writing regulations, providing guidance, taking other administrative steps to allow these programs to actually function, and get the dollars out the door. The administration is acutely aware that they are on a time clock here, and they want to jumpstart the benefits of all these great provisions. Groups like mine, EDF, are actively engaged here in providing technical expertise, as well as pushing for detailed provisions that we believe are going to drive emissions down in an equitable way and as quickly as possible. A lot of these agencies are trying to get input more proactively than we’ve seen in the past. And from our experience, they’ve been eager to hear from our technical experts, especially because now in some cases they’re working on issues that are a little bit outside their lane. As Elizabeth will mention, Treasury is now the biggest climate agency in the federal government and EPA is setting up things like this greenhouse gas reduction fund, which is a little bit not quite the way they usually operate. Meanwhile, we’ve got states that are working to figure out how best to access these funds. The infrastructure bill that I mentioned have a lot of money that flow through state capitals because historically that’s how transportation dollars flow. For the IRA, it’s a little bit different. There are certainly grants available to states and cities. That just takes some education and capacity. So we’re working in some key states where we’ve got boots on the ground to try and make sure that we can move that forward. Let me talk for a minute about some barriers that we see as we watch this unfold. The first one I’ll mention is citing and permitting. This applies to all green projects, but especially to transmission. We have a huge need to transform our electric grid. And right now it takes too long, it’s too unpredictable, and it’s too uncertain. So that’s a real barrier as we look to implementation. Second, a trained workforce of the build out required to address this challenge is highly incentivized by this legislation, but we see this constraint of a shortage of electricians and plumbers and other trained workers. The bill includes lots of adders for efforts, for apprenticeships, for job training, but those provisions still have a pipeline to them, and the demand is happening right now. And then the third challenge I’d mentioned is supply chains, which I think a lot of you can relate to. Supply chains are struggling right now, and companies are facing both shortages and uncertainty. While the emphasis on domestic content really has the benefit of creating new jobs and building manufacturing base, it’s also creating some short term challenges. The last thing I’ll say is I don’t want to end on a negative note as we talk about these barriers. In the last several months, this new plan has helped to create hundreds of thousands of jobs and has spurred billions of dollars of private investment. So the challenges we have in many ways are good news challenges. It’s because we are moving forward that we have these barriers. So I am optimistic about the path forward, and I look forward to the conversation today with all of you. So Jon, I’ll shoot it back to you. Jon Powers: No, I appreciate it, Elizabeth. Before we get to taxes and Elizabeth Crouse, I think for folks that aren’t familiar with Washington, one of the unique things that administration did is they actually brought the implementation quarterback into the White House. So you have John Podesta, who if folks don’t know who John Podesta is, definitely check him out. But he’s a bureaucrat’s nightmare because he really holds folks accountable in terms of moving the ball forward. So it’s not the bureaucracy that’s going to slow roll this, they’re driving because they know they’ve got, as you said, a shot clock to make this happen. Are you seeing that type of leadership affect the momentum at the agencies? Elizabeth Gore: Absolutely. I mean, I think that you’re exactly right about John Podesta. He’s very good at his job, and he is hammering on these agencies to move forward. And one of the things that we’ve seen is a setting of priorities in terms of trying to push some of these pieces more quickly than others. This is an enormous package, as I said, and John Podesta is helping to make sure that people are keeping their eye on the ball and moving these things, all these various processes, quickly and efficiently. So it’s absolutely making a big difference, but it’s a big, big job. Jon Powers: Yeah. And I guess a challenge to folks on the webinar and the listeners of the podcast is as this starts to move to the state level, making sure you’re playing a role in bringing your voice into those conversations. So a lot of the industry groups, whether it be the SEEAs or affiliates and others are going to be having state capital days where, definitely, your voice matters in these conversations, if you want to see things implemented that we can actually execute on. So I do want to move into the tax space. And I think folks know that energy policy in the US is tax policy, and that just got amplified in this legislation. So Elizabeth Crouse, I was hoping, obviously we’ll get into the adders that came out yesterday, but if you can provide a little bit of a coverage of the opportunity that came out of this legislation, as well as sort of the process and barriers we’re going to see moving forward in the tax base. Elizabeth Crouse: Yeah, definitely, and I completely agree, Jon, energy policy is tax policy these days. And thanks so much for joining us today, everybody on the line, and thanks Jon for the invitation. Really glad to be here. So just to level set really quickly, what we’re really talking about when we’re thinking about electricity tax credits here are just a few provisions. There’s the Section 45 production tax credit, which everyone’s used to thinking about as the wind credit. Well, it’s the solar credit now too. That’s based on production of electricity. And then there’s also the Section 48 ITC, the investment tax credit that everyone’s been used to in solar for many years now. The ITC is also what comes into play for storage. And now we no longer have to twin the solar and the storage. We can actually just account for them separately. After a couple of years, we’re going to have these two new credits, which are, I think of them as the Wyden credits because Senator Wyden’s been pushing for them for many years. Basically they are electricity tax credits, just like the ITC, just like the PTC, but they’re based on zero emissions, zero carbon emissions. And so will solar qualify? Yeah, probably. Storage also gets its own separate category in the ITC after those years. It’s a good idea to keep an eye on the new credits that are coming into play. It’s not going to be just a cliff. Everything after 2024 is just under the new credits. But it is a good thing to keep in mind because the process will be a little different for the current credits and the new credits. Storage, obviously, like I mentioned, it’s still an ITC thing. There’s no PTC for storage. Next slide please. The other really radical thing that we’ve got under the IRA for the tax credits is we’ve got this totally new idea of how we calculate tax credits. And this really tracks through with the adders and the multipliers, and all this new complication that we have. And so keep in mind here that we’ve got this low base number. For the ITC, it’s 6%. For the PTC, it’s a fraction of a cent per kilowatt hour. That low base is sort of an unrealistic thing. It’s sort of thinking about the 10% ITC for solar that we’ve had for years. No one ever really used it because it was so low that it didn’t really have enough punch. So don’t really think about the low base as a realistic thing. Think about the wage and apprenticeship multiplier. That’s how you get to the 30% ITC. That’s how you get to the current PTC rates. And that’s really what we’re seeing in the market. Everyone’s directed towards that. Which is why wage and apprenticeship is on the tip of everyone’s tongue right now. And then we’ve got these adders that Jon mentioned a couple of minutes ago for domestic content and then for energy communities. I think we’re going to talk about those a little bit later. And then the new guidance that was released yesterday that Scott referred to earlier has to do with this low income or Indian land sort of category. That it’s really only for small systems, less than five megawatts. And so we’re really talking about there is some C&I community solar and resi basically. But if you can combine all of those things, you can get to a really high impact. Note that the low income and Indian lands adder is only for the ITC. Okay? So you can get up to a 70% ITC with all of those adders. You can only get to 120% of the regular rate for PTC though because the PTC doesn’t have that low income or Indian lands adder. Jon Powers: So Elizabeth, just for the folks- Elizabeth Crouse: Go ahead- Jon Powers: … who are not familiar, PTC is production tax credit, and it’s mostly used in the wind space versus ITC, which is used in. Elizabeth Crouse: Right. Yeah. Like I mentioned, most people think about it as the wind credit because that’s really the only thing it’s been used for for the last 10 or 12 years. Actually. The PTC used to be available for solar, and now it’s available again for solar. What we’re seeing in the market is while some people are thinking about the obvious locations of the country as being a candidate for solar PTC, Arizona, New Mexico, Texas, stuff like that, we’re actually seeing clients think about the PTC much more holistically as sort of a one major factor in the financial calculations. So if you can get your construction costs down, the PTC starts to make more sense because it’s really just a matter of comparing the basis, which is what you get for investment tax credit, against your production, which is what you get for production tax credit. So yeah, thank you for pointing that out, Jon. And I think we can dispense with the slides at this point. Just wanted to do a little bit of table setting there so we’re all on the same page. As far as where we’re at, Jon, you asked about process and so forth. We’ve got the statutes. They’ve been around for six months. We’re starting to get into this regulatory process. Notice that there haven’t actually been any regulations released yet. We’ve had notices, several of them. We had wage and apprenticeship was released on November 30th last year. That was released as a notice. The ones that were released yesterday, notices. The key thing there is that notices are not subject to a public comment period. And so what the IRS can do, what Treasury can do when they release notices is they basically say this is what the rule’s going to be. No, you don’t get to participate in a public comment period. But on the other hand, tell us what you think, right? They don’t tell you that outright, but they are still listening. Jon Powers: So people are clear, so what they’re saying, there’s a rulemaking process. There’s very defined public comment periods which could take months/years to get done. In this case, it’s a notification which says this is what it’s going to be. People can still influence it. And I imagine you were and others are in the room on that, but it’s less of a bureaucratic delay so we can get it in place. Elizabeth Crouse: Well, yeah. Basically, and that’s really the point here. Notices are faster. Notices are a way to deal with these hard deadlines that we had in statute, as well as the soft deadlines that Mr. Podesta’s imposing, not Congress. We will get to regulations. Most of the fall many in the industry spent writing comment letters to the Treasury, in response to public requests for comments. Those comments are being taken into account in drafting these notices. They’re being taken into account in drafting the regulations that we will eventually get. We will get regulations. It’s just a matter of when because they take longer to formulate and to release and then finalize. So those are coming. What we have right now are wages and apprenticeship, the low income and Indian lands, at least initial notice. For those of you who read it, you’ll see that I’m kind of doubting this is going to be the last word on that program. And then there was also a notice released yesterday for the 48C manufacturing tax credit, which is an application appropriations based process. We still need, and I think everyone in the industry is eagerly awaiting guidance on the domestic content adder, the energy community’s adder. We still need some new comprehensive regulations just on qualification for 45 and 48, the PTC and ITC. So the point there is we will get something actually. Treasury’s been working on those regs for several years now. It’s just a matter of finalizing them. And I think the other one that a lot of people in energy are worried about is hydrogen. So those will come, it’s just not going to come tomorrow. Jon Powers: Yeah. And I think if I’m a developer, understanding that that uncertainty still exists as folks are looking to finance these projects. And understanding how that can be incorporated into a deal or the capitalization of your projects is really important because there will be uncertainty for a while until there’s clarity. And from a financing perspective, it’s important that we have that conversation back and forth with the developers so they’re aware of that, and we can solve for that problem. So first of all, I want to challenge folks to keep the Q&A coming. We are going to answer some of them, along with the questions, some I may type in here as well. Elizabeth Gore, I want to get into a conversation around the stimulation of both manufacturing, and now based on what the questions, I’m going to add jobs in there as well. There are certain provisions that are incentivized US manufacturing. As you said, the supply chain challenges are real. If you want to buy an American made solar panel right now, it’s actually pretty challenging, but we want to see more and more of that. Obviously the administration’s championing that, and so are many others in Congress. What are some of the key pieces that are driving manufacturing, and what should folks be looking at? And then I’m going to sort of second in terms of jobs and apprenticeships, what are some of the provisions that if I’m looking to move into this industry, for instance, I could be taking advantage of? Elizabeth Gore: Yeah. So manufacturing is a big part of the bill. Elizabeth was just mentioning the 48C piece, which is competitive tax credit. This is something that’s been around for a while, but really received additional funding and expanded portfolio of qualifying projects. And that one, like so many others in this bill, includes these labor related requirements in order to get the full value of it. So that’s kind of in an intersection of this manufacturing piece and the job labor piece. There’s also an advanced manufacturing production tax credit, which is for clean energy production like wind turbines, solar pieces. And then we’ve got DOE loan guarantee office, which had been a little bit dormant for a while. It got a boost in this bill for 1703 projects. That’s a pretty broad list, and I think the infusion of dollars there is really good news. Listen, I think that there are these domestic content provisions, these labor provisions, that are sprinkled throughout the bill. They are going to shift supply chain, and they are going to drive additional domestic manufacturing. I just think that they are robust enough to actually change behavior in a real way. As you mentioned, the short term impact is real in terms of both supply and price. There is a tension here. I think the administration is really trying to smooth out that transition. We all have seen the two year break on the solar panel tariffs that the administration is pushing. And while that’s getting a little bit of static on Capitol Hill, that’s going to stay in place and help to create this bridge the White House has talked, about the solar bridge. And I think the administration’s also looking at creative ways to phase in those EV domestic content provisions. Again, there’s still some more to come there, but I think that the administration is trying to find ways that they can make it easier so that we can address some of the dislocation that you are referencing. And I would also say on the labor, the apprenticeships, again, sprinkled throughout the bill in a way that is going to change the behavior of developers and of companies that are taking advantage of these credits. So I think it was very intentional the way that it was structured, and I think we’ll see more happening there. Jon Powers: Yeah. For folks that are not as familiar with the politics of climate, definitely there was a lot of conversation with the unions for the first time really coming into this bill. And we’re seeing that play out in the prevailing wages and other important pieces. And it’s actually, honestly, it’s great for the industry to get them on as champions for what we care about because when they were looking at things like pipelines, it created a lot of jobs for them. So often they would champion a pipeline. We want them championing solar and wind just as strongly. Elizabeth Gore: Yeah, absolutely. I just highlight there’s a group called the BlueGreen Alliance, which is labor unions and environmental groups coming together and trying to find that overlap of things that they can work together on. This is coming actually out of Waxman-Markey, where those two segments were not aligned. And I sit on the board of that association, and it’s a great way that the politics have been knitted together here to be able to push forward on these policies, just as Jon mentioned. Jon Powers: So Elizabeth Crouse, I’m going to get into some of the adder language notification came out yesterday, so we can talk a little bit about that. Before we do that, just to table set, looking at some of the questions coming in, there is a focus on prevailing wages. There’s a focus on low, moderate income communities. It’s really driving climate justice. And as you dive into what came out yesterday, can you also talk a little bit about how things like the Department of Labor’s guidance will tie into the Treasury guidance, and if it does and how, as we explore the adders portion of the bill? Elizabeth Crouse: Yeah, for sure. I mean, where you have to start is the prevailing wage and apprenticeship adder. And I think I completely agree with Elizabeth Gore. Adding those provisions was a stroke of political genius, 100%. And it’s creating problems for me and other practitioners because we’re helping clients try to figure out how to navigate them. Now, there are pathways, all right? Don’t get me wrong. We have a notice that came out on November 30th. It’s woefully incomplete. It really needs to be expanded. There are so many niche areas. But we do have resources. We have the Department of Labor published two FAQs, one on prevailing wage, one on apprenticeship. We know now that prevailing wages were in the rules in the way that they were drafted because the Byrd Rule prohibits just basically saying, “Go follow all the prevailing wage rules for government contracts.” We can’t just do that in the statute. So we know that that’s a guiding light. We know that the government contract rules around prevailing wage are a guiding light. We know that the government contract rules around apprenticeship are a guiding light. So we have resources. What we don’t have is Treasury just coming out and saying, “Look, just go look at those other areas and figure it out.” But that’s what everyone’s doing because we don’t really have a choice at this point. I’m talking with some clients about going back and taking another stab at Treasury and saying, “Please, could you give us a little more here so we have a little bit more certainty?” Because the worst part of contracting is when you don’t have certainty. And so you just have a lot of nervousness and contingencies and so forth. Now, the other adders, maybe a little less important in the grand scheme because they’re not quite so crucial to getting a financeable tax credit rate. But there’s still an important thing because it’s real money on the table. Domestic content, that’s an additional 10% ITC. That is something, and it’s worth fighting for. Domestic content is kind of complicated. We’ve got two buckets. There’s steel and iron, which is basically structural steel, we think, and then we’ve got manufactured products. The steel and iron part is actually a little easier to grapple with. We do have US steel supply. Is it enough? No, but we are seeing advancement. We’re seeing increases in production already. And were frankly before the IRA too because of supply chain problems with the pandemic. Manufactured product is really hard. It’s really hard. We really don’t know what they’re going to do. There are different ways that they could take this. And I mean, to Elizabeth’s point, depending on how they take it, there’s this real tension between creating US jobs broadly, creating US manufacturing base broadly, and creating more clean energy. There’s a real tension there. And so while my masochistic side would love to be at Treasury writing these rules right now, on the other hand, maybe I’ll sleep better if I’m not. Jon Powers: By the way, as you get in what defines manufacturing, are you talking about panel from ground up, or is this assembly of different components? Elizabeth Crouse: Exactly Jon Powers: How that- Elizabeth Crouse: A manufactured product. Is that your whole inverter? Is it the whole panel? Is it just the silicon cell, right? We don’t know. We don’t know. And how they slice and dice, when I’m looking at something on my desk or on my table or at my site, identifying what that manufactured product is, and then identifying when I can call that made in the US, that’s crucial. And that’s going to have massive ramifications. So I mean, I don’t know that there is one right answer, but someone’s going to have to come up with an answer, to be honest. Then the last really consequential adder is the energy communities adder. There are three categories there. There’s brown fields within the EPA definition. My policy group lobbied for that, was really happy that they got it. But now we’re going to go through this process in EPA about what brown fields are, right? The rules are being cracked open again, and so there are some questions there as far as implementation is concerned. We’ve also got two- Jon Powers: Can I just explain it? As someone who does brown fields at CleanCapital, we see with our partner BQ, they actually did not, I think unintentionally, didn’t actually push the most, I’m going to get the terminology wrong, but the sort of worst sites. The worst sites are not incentivized here like they should be just because they use a previous definition of brown fields. Elizabeth Crouse: Exactly. Exactly. Jon Powers: And clearly that was not the intent, but it’s likely because this happened so fast, there was, I assume, some copying and pasting of previous language to put in there. But once the bill’s a bill, it’s how you then put it down. Elizabeth Crouse: There’s a certain amount of political jockeying, as Elizabeth Gore can well tell us, where you got to get something in there. Like you said, it’s fast, it’s furious. Get something in there and we’ll figure it out later. We will figure out a way. It’ll be fine. We will figure out a way. The other two categories, one is really closely tied to coal mining and coal fire generation. It’s tied to census tracks and adjacent census tracks. We have a good idea, a good playbook of how that works out. We have some federal government resources, as well as just publicly available resources. There’s a third category that’s harder. It’s tied to things like transportation and production and so forth of gas, oil, and coal. That’s difficult because we don’t have good, solid, reliable federal data that ties neatly to the categories in the statute. So there’s some good ideas about what to use, and working with clients, we’ve established some things. They’ve provided input. We found a way forward. But I can’t tell anyone that it’s the right way forward until we have guidance. And then the last adders are these ones for small solar and small wind, less than five megawatts. That’s what was released yesterday. There are a couple of different categories. The sort of basic one is locating a facility in a low income area that’s using, I believe NMTC, new markets tax credit guidance, as far as what a low income area is. And then also Indian lands within the federal definition. So that’s a really interesting additional credit. It is application based. I understand that a lot of people are up in arms about the notice yesterday because, honestly, it probably does favor community solar. It probably does favor the two to five megawatt range of projects. And the smaller resi stuff, even the smaller low income rooftop stuff, it’s going to be maybe a little harder to get unfortunately. I’m not sure that that was intentional. Maybe it was. But regardless, we don’t have complete guidance yet. I mean, what was released yesterday was sort of a place holder, honestly. That’s how I would characterize it. It clearly says there will be more guidance as far as what the application data will be. And applications aren’t even going to be accepted until Q3 this year. So there’s still more work to be done there. The way to get more money out of that one too is to either do low income rooftop, or some kind of an economic benefit to the residences of a low income area. We’ve seen that. I’ve personally seen that with some projects out in Seattle that have to do with federal housing because there are rules in the federal housing regulations about economic benefits to the residences. So I think that was probably intended to tie neatly. And so we know we can do it. It’s just a matter of getting those final regulations from Treasury so that we know exactly what we’re doing. Does that make sense? Jon Powers: Yeah. I’m going to stick to taxes for a second, Elizabeth. And I’m going to get into transferability first, which is clearly an important question. Before I do that though, if I’m a developer out there today, I’m looking at all these different provisions, it’s almost like there’s all these different menus of options. And I think the clarity’s only starting to now come together on how they tie together. Will a firm like K&L Gates at some point put out a roadmap to say, “Look, if you’re going to build a project, you should consider doing this.” If you were a developer, how would you start to understand this so you can figure out where you should be focusing on the projects themselves? Elizabeth Crouse: Strategy? Jon Powers: Or CleanCapital. CleanCapital Elizabeth Crouse: We’ve been doing a lot of work with clients around strategy right now. And it’s a little different for every company. I mean, we even know that the development roadmap, even for small solar, it varies from company to company to a certain extent. And it can take a while. And so there are folks out there, development shops, that already have a good idea of their strategy, their regional strategy. And so maybe it’s just a matter of sort of honing their site selection process, or something along those lines, or plucking sites they’ve already identified out of their portfolio and sort of segregating them into a different bucket. But beyond that, sort of the strategy about how to go about financing process, how to go about the tax credit qualification, procurement’s a big deal. We’ve got a whole lot of questions and a whole lot of different concepts around how we approach the contractual provisions for wage and apprenticeship, how we identify the right people, how we identify the wages, how we secure indemnification. There’s also strategies around procurement of material when we figure about domestic content. Energy communities are a little easier. That’s really just sort of you’re in or you’re out. But that sort of strategy process, it’s hard to just create a roadmap because it’s going to be a little different. I mean, I can give you a timeline, but there’s going to be a lot of different factors that go into that process. Jon Powers: No, that’s helpful. Just to sort of tee up the audience, please keep your questions coming. I’m going to get a transferability, then I’m going to let Elizabeth Gore come back to you on storage here momentarily. Elizabeth Crouse, my partner Tom was down in New Orleans at a project finance conference just at the end of January. And he came back and said, “All people were talking about is transferability.” For folks that are not familiar with what transferability is, could you just give a little bit of an overview of it, and how it should affect the market here? Elizabeth Crouse: Yeah, everyone’s talking about transfer. The single thing that made my eyes pop the most in the Inflation Reduction Act was the provision that says you can sell tax credits. That’s what transfer is. My entire career and before, we’ve labored under this concept that you have to be an owner of a project, directly or indirectly through a partnership, in order to claim tax credits. And that’s driven a lot of the work around tax credits. Now that we can transfer, what that means is that, in principle, you have a lot more options. You have the ability to create essentially financial instruments around tax credits. And that’s a big game changer. Now, it doesn’t mean that the old style of financing is going to go away. There’s still definitely a place for the old partnership models, partnership flips, all that fun stuff. But what I think we’re going to see now is more and more finance players involved in project acquisition and then transferring the tax credits. Transfer means a dollar for a tax credit, basically. Cash for credits. It’s that simple. Now, there’s a whole bunch of detail baked into that because the person who buys the tax credits becomes the taxpayer for those tax credits, vis-a-vis the IRS. That means if it’s an ITC and you have recapture potential, they’re facing the IRS. So what does that mean for the developer or the project owner? They’re still facing the transferee as a regular tax equity investor. There’s still risk there that the developer or the project owner’s going to have to wear under the contract. PTC’s a little easier. Jon Powers: So just so to be clear, so I, as a corporation, if I was a corporation, maybe the Supreme Court, corporations are- Elizabeth Crouse: We can make you a corporation. Jon Powers: Yeah. I have tax credit capability. I could sell it to Elizabeth Gore, who then could use it within the ITC, but then she’s just taking the risk of that capability. I no longer really am investing in solar here, but she is, using my tax credits. Elizabeth Crouse: That’s basically right. Yeah. Yeah. So it’s not totally dissimilar from the traditional way. We just don’t have to worry about ownership anymore. We don’t have to worry about ownership for a tax purpose. Jon Powers: And we let a lot of CFOs of corporations who just say, “This is not our specialty, but yeah, I’ll sell you my tax credit. You take that risk.” Elizabeth Crouse: Basically. Yeah. But couple of things to keep in mind. We still have the risk issue that we have to deal with in contracts. Appropriate indemnity as tax credit insurance has an even bigger role to play now, I think. And then we also have to remember that you can only transfer it once. Okay? So all these financial instruments and concepts that are growing up around transfer already, bundling them. Maybe creating pools so that if, for example, you’ve sold your tax credits on a forward basis to somebody else, and you don’t come up with their minimum, you can have access to a pool perhaps, but you still only can only transfer once. And so there’s going to be some pressure there around what the IRS guidance is going to be, what constitutes a transfer. We have a lot of educated guesses we can make based on guidance in a lot of other areas. There’s going to be some pressure there. I think what’s really important for the audience really to think about here is transfer opens up whole new worlds for financing solar and wind and hydrogen, and storage, and all this fun stuff. But it’s not without risk. It’s not free money. And you do need to understand that there will be a discount. You’re not going to get a dollar per credit. You’re going to get cash, but it’s not going to be a dollar per credit. And there’s also going to be some timing delays, we think. Pending guidance, we think there will be some timing delays. You’re not going to be able to monetize as early as you do in a regular tax credit structure. Elizabeth Gore: When we’ve looked at the transferability piece, I mean from our perspective, it also, to your point, Elizabeth, opens up entities that don’t have a tax liability, and previously had no incentives to try and engage in this kind of development. So co-ops or municipalities, or all of these other power producers have new incentives that they couldn’t access before. So yeah, it widens the lens in a way that from a perspective of an environmental group is very hopeful in pushing these forward. Elizabeth Crouse: Yeah, absolutely. Direct pay is a whole nother huge innovation, Elizabeth. Thank you for mentioning that. I have a client in the muni space, muni transit of all things, and they’re super excited about direct pay because their attitude is government needs to lead the charge on some of this stuff. And their hands have been tied to date when it comes to tax credits. Community groups, I have another client out in Seattle that does all sorts of low income, tiny solar, tiny, tiny solar. And it’s always been difficult for them to do anything with tax credits because they needed a third party. Well, this is a whole new world for them. Now, we have all sorts of new people at the table. It’s not just a handout for banks. It actually is going to work, I think, for a lot of people across the country. Jon Powers: Excellent. And I’m going to end before we get some closing comments, Elizabeth, we’ve talked a lot about solar and a lot about a variety of pieces. I mean, we’re missing so much in terms of climate justice, and there’s so many exciting things we can dive into here. But I do want to hit on storage for a second because this is a monumental bill in really moving the storage industry forward. Could you just talk a little bit about some of the provisions that are in here that are going to help accelerate both the manufacturing and really the deployment of storage? Elizabeth Gore: Yeah, sure. So the US needs to build 100 gigawatts of energy storage by 2030, something on that magnitude, in order to meet our climate goals. And after being overlooked for years by policy makers as they focused on wind and solar, I feel like this bill, storage finally made it up to the grownups table, which in a way that is really important and is going to help leverage all these other investments. So as Elizabeth mentioned earlier, standalone storage products are eligible for the new ITC. So it’s not just those that are connected to other projects. And direct pay is going to help storage as it will with other policies as well. The domestic manufacturing provisions and domestic content policies we think are going to boost energy storage. And we’ve also seen some private investments in this space since the bill was signed. So just the bill on its own is sort of leveraging and jumpstarting some of those markets. And we talked a little bit about the Loan Guarantee Program over at DOE. Last June, as you probably already know, DOE announced its first loan guarantee in a decade. That was for an energy storage project in Utah. So as this program gets more funding and more interest from the administration in utilizing that tool, I think we’re going to see more and more projects like that as we try and push some of these renewable projects forward as well. Jon Powers: Many of you guys know our good friend Jigar Shah, who’s helping to quarterback that at DOE. If you don’t know Jigar, you probably have not been around clean energy, but having leaders like that across the industry are going to help drive the change we need in getting this bill in place. And your just closing comments. I wanted to, first of all, thanks everyone for the questions. Sorry we didn’t not get to get to all of them, but I tried to incorporate as many as I could into the dialogue. We’ll start with you, Elizabeth Crouse, any closing statements? Elizabeth Crouse: Yeah, I mean, I think just really in closing, we’ve got a lot of opportunities in the Inflation Reduction Act. There are details, there are gray areas. We’re working through them. But there are a ton of opportunities here, and I think there’s a lot of promise for the energy transition in the US. There’s a lot of promise for communities here too. And it’s all up to us to try to move the ball ahead, try to work with the financing parties, get them used to the new concepts, get them used to the new asset classes, and work together to make this happen. Jon Powers: Excellent. Elizabeth Gore. Elizabeth Gore: So we see this as transformational, and I think there are a lot of details yet to come, as Elizabeth just mentioned, but I think we’re already seeing the impacts of the bills. We see some of these investments coming down the pike. I would also say that the focus on these energy communities and on frontline communities, again, it may have been a political move in terms of trying to build this coalition, but it really broadens out the support that we are seeing. There have been more investments in red communities than in blue ones. And so again, we’re seeing the benefits of the clean energy transition really spread out in places that I think are going to help to build durability and to build support for additional steps. Credit Suisse put out a study that showed how this bill can leverage investment. And while the Europeans have been a little bit unhappy about some of the domestic content provisions and domestic manufacturing provisions, they’re now kind of getting on board here and building out their own industries in a way that’s going to continue to drive down prices. So I think this bill is an enormous opportunity to really transform the economy and make it a clean energy economy. And I don’t think it’s all going to be because of the bill. I think it’s going to be that bill is a catalyst to making a lot of other activity happen. Jon Powers: Yeah. Well, thank you to both Elizabeths. And I think it’s really important for folks to recognize this as a once in a generational piece of legislation that we’ve seen. And a whole different podcast for another time, when you marry this to the Infrastructure Bill that was done just prior to it, it aligns things so perfectly for our industry to continue to accelerate to solve the climate crisis. When they had the White House signing in September, I remember Tom Steyer making a comment about the fact that this is the government handing this over to the private sector and saying go. But those rules are being put in place now. It’s incumbent on all of us to take action so that we can make sure that the rules are working for us as an industry. So when groups are asking you to take part in dialogues, or maybe to write an op-ed locally or whatever, please make that effort because we need to have our voice in this conversation to get the rule book we need to be able to execute. Thank you to everyone for joining. Thank you to the team at K&L Gates and the EDA, Environmental Defense Fund for helping put this together, as well as the team at CleanCapital. Scott Elias, thank you for opening this up. And for our producers, Colleen Young and Carly Battin, as always, for the Experts Only Podcast, you can get more at cleancapital.com. Really appreciate you joining us and look forward to continuing the conversation. Elizabeth Gore: Thanks. Jon Powers: Thanks. Elizabeth Crouse: Thank you.