Carly Battin: Welcome to Direct Pay: What it Means for Solar and Storage Developers. I’m Carly Battin, Director of Marketing at Clean Capital. And I first want to thank you for joining us today. We’re here to provide an overview of direct pay what it is, how we expect it to move the clean energy industry forward, its status in Congress and what you can do to help move it forward. Now I’d like to introduce our panelists. First, my colleagues at Clean Capital Jon Powers, co-founder and president who will serve as moderator for today’s conversation. Melinda Baglio our Chief Investment Officer and general counsel. We’re also joined today by Shannon Bañaga, from the Partnership for Clean Energy Investment. Chris Matheyhead of Federal Policy and Development at Stem Incorporated and Joshua Baribeau Vice President of Finance and Corporate Treasury at Ameresco. Thank you to all of our panelists for joining us. And with that, I’ll turn it over to Jon. Jon: Carly, thanks so much. And thanks so much for everyone for joining. As Carly said, my name’s Jon Powers, I’m the president and co-founder of Clean Capital, but one of the reasons I wanted to put this webinar on today, in my previous role I’ve sat in Washington on the other side of the table from advocates who’ve come in to talk about moving an agenda forward. And there’s nothing more powerful than someone who comes from not an industry group or lobbying firm, but who’s actually in the states doing the work. Jon: And what we’re having this webinar today is to help drive you to action and to help move forward a critical piece of the clean energy agenda, which is the 100% direct pay. So if you think about the role that tax policy has played in our energy policy, it’s significant. So in 2007, the Energy Security Act was passed by George Bush in a bipartisan way, included the uptick in the investment tax credit for solar and the PTC for wind. That has been an unbelievable economic boost to our industry and has helped drive us forward to where we are today, where the fundamentals of our industry are strong. Jon: And we have really grown as a marketplace. What many of us have seen on the deal side is there continues to be a challenge right now between demand of projects and supply of tax equity. And one of the solutions for that is this concept of 100% direct pay. So today we’re going to walk through what that is, how it’s going to affect deals, how it’s going to affect you as developers and other folks that are in the audience. And then really what you can do about it. Because really are ask today is not just to understand what’s going on, but to take some action and help us push this over the goal line. So we can take 2022 and beyond, and really continue to accelerate the market. So I’m going to start with Shannon who’s from the Partnership for Clean Energy Investment. So first Shannon, what is the Partnership for Clean Energy Investment? Shannon: Thank you, Jon. And good morning, everyone. So the Partnership for Clean Energy Investment is a coalition of a broad base of stakeholders united in support of advocating for that one single issue, you just described 100% direct pay. It’s our view that this one mechanism will truly be a game changer on America’s ability to unlock infrastructure investment, unleash economic growth, and deliver on the climate and clean energy goals that we have. Shannon: Further, we take a very holistic view of direct pay. If an is qualified to receive a clean energy tax credit, 100% direct pay should be offered as an option for that entity to use. The reason why we take that view is that we are going to need absolutely all of these clean energy technologies to meet our goals here. Jon: Absolutely. So for folks that aren’t familiar… Well, first of all, the reason the coalition is so important is a lot of us are part of industry groups that are in Washington pushing the clean energy agenda. But they have a whole plethora of things that they’re asking for. The importance of the coalition is it’s very focused on one specific ask and educating members and their staff on the importance of that ask. So just so people understand, can you talk about what 100% direct pay is? Shannon: Absolutely. So 100% direct pay and maybe I’ll, I’ll take a step back and expand a bit on the membership as you kind of teased out there. One of the things that was really important to us as you noted this isn’t to replicate a trade organization. These trades are really, really valuable in everyone’s different industries, but they also have a variety of priorities, frankly, that they’ve got to get crossed. So the development of this coalition and the diversity of membership for this coalition was really important to us. Shannon: Because our ability to put more clean energy projects in the ground affects every community. So we are comprised of a variety of stakeholders, developers such as utilities, public power, think tanks, trade groups, and others. In addition, we’re working alongside a lot of the environmental NGOs here in Washington, energy purchasers and other supply chain industries to really nail the point about 100% direct pay. Shannon: So the 100% direct pay option works as an alternative to the current tax equity syStem, that puts tax credits directly into action, improving our power syStem the way that Congress really intended. The tax equity syStem will continue to exist and thrive. So for any financial institutions out there, this is not a death knell at all, for those that choose to utilize it. But under direct pay entities that eligible to receive clean energy tax credits such as the ITC or PTC, which we’ve touched on, would receive the equivalent funds directly rather than a tax credit that either has to be monetized later or in some instances like nonprofits and public power can never be monetized because they don’t have sufficient tax liability to do so. Shannon: So one of the reasons this is so important is that as I mentioned, we’re expanding the variety of clean energy technology is necessary to meet our clean energy and climate goals here. As Congress expands that pool of recipients for PTC and ICC, the tax equity market is equally flooded with proposals from across the entire clean energy spectrum, storage, solar, hydro biofuels, hydrogen carbon capture, transmission. I could probably go on in too long here. It’s really important that offer all the tools that we possibly can to make the most efficient gains here on our clean energy goals. Jon: And Shannon, it’s important for the audience to understand that we’re not saying direct pay versus an IPC extension. Shannon: Correct. Jon: This is together. It’s an additional tool on our toolkit, Shannon: Absolutely. We’re not undercutting the value of these other priorities such as extension of other federal tax credits or storage ITC, but we are saying those, those things will suffer the same fate as what we’ve experienced so far. An inability for developers to really monetize the development that Congress intended. Shannon: The finance community, I think recognizes the constraints here. Think one of those stats that came out late last year from Bloomberg was 59% of solar projects and 67% of wind projects that were scheduled to start construction in 2020, going into this year, were still in need of tax equity financing. Marshall Fallon over at CitiGroup noted in an S&P article recently that there’s never been enough tax equity dollars to supply all of the good projects. So this isn’t a reflection on due diligence or anything. It’s just a matter of this constraint and the way that direct pay would really present clean energy developers with a more efficient means of financing these projects. And it doesn’t rely on the financial institutions weighing out their own tax liability before engaging with those developers at the end of the day. Jon: And for folks at are… Regarding the partnership, are you guys still accepting members? Shannon: Absolutely. Absolutely. I know we’ll touch on a bit later, but we are definitely in French time right now. The next three weeks are a very crucial moment in our advocacy. We’re accepting members. Happy to reach out to anyone that’s interested. I know we’ll put up our contact information at the end of the webinar here. Jon: And here’s my used car salesman pitch. It’s no cost to you so you can join the membership and influence what’s going on. Shannon: Absolutely. Jon: Melinda, I’m going to talk for about what the 100% tax equity, 100% direct pay does for driving efficiency, changing economics, driving innovation, really driving equality for the industry. Can you talk for a second about what Clean Capital is first and then talk about how this will affect financing projects. Melinda: Absolutely, Jon. Thanks for the intro. And thank you, Carly. So just a quick intro on Clean Capital. Clean Capital is a clean energy investment platform. We focus on the middle market, clean energy technology. So solar projects ranging from under a megawatt up to maybe 20, 25 megawatts that we then aggregate together into attractive financing and investment portfolios. We’ve been around since about 2016, and we’ve in that time deployed about $850 million in acquisitions for operating and new build solar projects. Melinda: I think what kind of distinguishes Clean Capital from a lot of companies out there that do similar work is our ability to work quickly and efficiently. We have partnered with a number of developers and clean energy sellers to build our portfolio pretty quickly over the last several years. I think we’ve closed four transactions in 2021, whatever year we’re in, 2021. Melinda: And we’re now in, I think we’ve acquired assets in over 19 states… Or in 19 states. So we’ve got a lot of experience kind of working across several different jurisdictions. So that’s kind of Clean Capital in a nutshell getting into tax equity. I want to piggyback on some of the things that Shannon mentioned in her presentation. So just taking a step back, she sort of mentioned, this is going to be like a quick tax equity 101, how it works. Melinda: So she mentioned that a lot of folks are not able to monetize the tax credits that come in the form of the PTC or the ITC because they don’t have the tax liability. And so what happens is they wind up partnering with a bank or a corporate entity that does have the tax appetite to monetize the tax credits. And you wind up having another financing party that’s part of your deal. So as you’re building up your capital stack, you’ve got your sponsor equity, your tax equity, and then typically you’ll have debt on top of that as well. Melinda: And that’s how folks have been able to actually monetize the tax credits when they don’t have their own tax liability. You can imagine that that leads to a lot of complexity, just adding another third party financing entity into the mix. You’ve got multiple parties doing the same due diligence. You’re paying multiple law firms to do the same due diligence. You’ve got a separate set of financing documents, so it can get pretty messy, pretty complex, pretty quickly just having that extra a layer on there. It caps the amount of debt that you can raise on your project because you’ve got this tax equity partnership in between your projects and your debt. Melinda: You have less cash available to pay debt service. So you’re not able to leverage the projects as much as you might otherwise. So it’s a great syStem. We’ve got some great partners that we’ve worked with on third party tax equity, but it does add complexities to the process. And for us in particular, when you’re looking at these smaller projects in the CNI space, where, where Clean Capital really excels, the more you layer on additional costs for diligence and legal fees, you feel it a lot more. The other big issue is on timing. So when you’re bringing in a third party tax equity investor, you need to have them come into the deal before the project is actually operational. So going back to what you said, Jon, about how you can’t always find the tax equity financing when you need it. Melinda: This happens year after year. In the beginning of the year you’ve got these great projects. And particularly if, like Clean Capital, you’ve got kind of smaller projects. You need to aggregate those to a size that then becomes attractive to third party tax equity, which is where we Excel, but we see a lot of developers struggle with. But you may struggle to find tax equity early on in the year. At the end of the year a lot of times you have folks raising their hand and saying, “Oh, wait, I have extra availability this year.” But by then, it’s probably too late because you’ve either decided to scrap project or you’ve kind of found a different path forward. So there’s timing issues that come up that also lead to a lot of uncertainty when you’re dealing with a third party tax equity provider. Melinda: So I think that’s sort of the background here on the challenges of our current syStem. Getting into direct pay. Obviously it’s less complex because you won’t have that third party tax equity provider. You won’t need to bring in a third party tax equity provider. Typically the way I’ve seen these deals structured back when we had direct pay, 10 years or so ago, the cash grant program that was place. Typically these deals are structured with, you’ve got your one senior lender. You don’t have third party tax equity, but you may have a tax equity bridge loan, or sorry, a tax credit… We used to call them cash grant bridge loans, I guess they would be called direct pay bridge loans or whatever we decide to call it. Melinda: Once we get direct pay implemented, fingers crossed, but it would usually come from your same financing party. So you’re still just working with one kind of set of lenders and one set of legal on the lender and financing party diligence side. So that’s on the complexity, the legal structure. From a commercial perspective it’s great. You can raise more debt on these projects. And typically you can, as a developer, earn a high developer fee by removing this additional piece of the capital stack. Let me pause there. Jon: For instance, when you work with Clean Capital, we’ll handle all the capital stack side for you. But I think the key from what Melinda’s laying out is it’s going to bring efficiency to the transactions. And it’s also going to bring better economics to everybody at the table, including the developers. So it’s a really exciting path to help really get more projects in the ground more quickly. Jon: I want to go next, Melinda talked about the efficiency and economics. I want to talk for a second about innovation and equality and what direct pay can do for that. And I’m going to turn to Josh. Josh, Ameresco’s working nationwide and with developers and developing your own projects. Can you talk for a second about what Ameresco does? Josh: Sure. Yeah. So thanks for having us everybody. Good morning. Ameresco is a leading clean tech solutions integrator. We are a public company, we were founded in 2000. We have just about a billion in sales and pretty healthy profit margins. We have a portfolio of over 300 megawatts of energy assets that we’ve developed and currently own and operate. It’s a little bit heavily skewed, a little bit more heavily skewed towards solar, but we have almost a hundred megawatts biogas assets on the portfolio as well. Josh: We have some wind and we have some standalone battery storage too. We operate in North America, as well as the UK. And back to our energy asset portfolio. We have, also over 300 megawatts of a similar mix of biogas solar battery and what we call energy as service assets in construction or in development. And while we are an asset owner and asset developer, we’re also, what’s called an energy efficiency or ESCO company where we serve primarily government municipal and federal government customers, as well as CNI customers to do some pretty deep energy retrofits. Things as sophisticated and advanced as advanced building controls, microgrids. Josh: And again, distributed generations I’ve talked about. As well as things that aren’t so exciting, but certainly help save our customers money in terms of water savings and electricity savings, lights, motors, drives, shower heads, things like that. So that’s Ameresco. I think the question was about innovation. Jon: Let me frame it up here. If you think about- Josh: Sorry. Jon: No, it’s okay. If you think about the market today, there’s more demand than there is supply of tax equity. So a tax equity provider really has to choose between possibly a vanilla solar project or a more complex project that involves a variety of innovations. How will direct pay really help move the innovation side forward? Josh: Well, so I think there’s two things it’s not only just complexity in terms of the technology, if you’re adding battery to solar, or if there’s some other nuance to maybe the revenue piece of it. If you’ve got multiple off takers, or if you’re in what I believe are some confusing state regimes that have just variable net metering credits and there’s recalculations and things like that. Josh: But also just project size. It’s to your point, a small asset portfolio takes just about the same amount of we’ll call it legal expense diligence, headaches, paperwork as a project’s 10X, or 100X that size. And so in an environment where there’s limited human capacity at a tax equity firm, the majority of tax equity is sourced from very large multinational banks who have hundreds of thousands of employees, but the tax equity group is actually very small. Josh: If they only have a small team of a few people to deploy X number of billions per year, they’re going to have to chase where the highest returns are on their time. They can’t direct five people to do a million dollar deal. They need to direct those same five people to do a billion dollar deal or a hundred million dollar deal. But the same thing goes for complexity. If it’s a vanilla utility scale deal, if there’s ever such a thing, that checks the box of a hundred million or 200 million of capital deployed. Josh: That doesn’t require them to do a whole lot of thinking, where in the sense that they’ve done it before, they know the diligence, they know the players, they know what the IE report looks like, the environmental, et cetera. If they need to do due diligence and sort of convince a credit committee or an investment committee or a tax committee of why it may makes sense to add a whole bunch of other things, whether it’s a battery, a fuel cell, wind, a microgrid, whatever it is, all this complex technology. Or why it makes sense to be in a variable end market where there’s maybe some merchant revenues or capacity sales, et cetera, et cetera, they just don’t have the time to do that. Josh: It’s a bang for the buck type of thing. So if you take them out of the equation that’s, as Melinda was saying, one less group of people and group of attorneys, group of consultants, doing diligence that need to get comfortable with something that a developer like ourselves or some of the folks listening here are trying to innovate. To try to create solutions for customers that meet a customer’s need, not a bank’s need. Jon: And a similar trend, not just around innovation, but also around equality. If you look at things like low and moderate income communities, for community solar, the current regime in tax equity doesn’t give any credit to that. And most likely would be, as you mentioned, looking at large-scale utility opportunities to put hundreds of millions versus smaller community, solar project that connects to LMI. So there is an argument this is also going to help drive equality across the industry as well. Josh: I would tend to agree with that. If I may, I think Jon, or some combination of Jon and Melinda were saying that this could improve the economics within the value chain. I might try to go a little controversial here in the sense that I actually don’t think that’s the case. If it helps anybody out, it probably helps the customer, which is probably a good thing. But what I’ve seen in I’ve been in the solar industry and renewables industry for over 15 years. And we’ve seen a lot of compression in pretty much every piece of the value chain. Whether it’s the hardware itself, whether it’s finance, et cetera. And what I think we found is that this market is so hypercompetitive, I don’t believe that just because there’s, we’ll call it extra economics, that are coming into the deal because you don’t have to spend a million dollars to structure a tax equity deal. Josh: I don’t believe that developers get that million dollars for free. I think that there’s so… I mean, I think Jon, you’re saying there’s over 200 people alone on this webinar and that’s, I’m sure just scratching the surface of people paying attention to this issue. And certainly in our space. We operate in a hyper-competitive environment. My guess is all of those will call it a economies from reduced transaction costs of tax equity, probably most of it goes to the customer. Josh: I don’t believe developers will make a huge windfall for this. I’m guessing the next developer behind them will just bid lower to the utility or to the customer within the low income program. And so I think ultimately it benefits the customers, which in terms of government policy is probably what they ultimately want to do. I doubt there’s a lot of politicians that have campaigned on let’s make developers or let’s make wealthy people richer. It’s probably more like let’s help out rate base of utilities. Let’s help out the average citizen. Let’s help out… Let’s help create more of a clean economy. So I do believe that this will definitely help deploy more, we’ll call it megawatts. I don’t think it’s going to make any of us richer. That’s just my personal opinion. Jon: Shannon, you have some additional thoughts on equity as well. Shannon: Yeah, no, it just dawns on me as Josh was talking, this is such an important priority for this administration. And for those, perhaps not in Washington, you may not have seen the level of emphasis that this administration has put on equality and especially energy equality. They’ve put in an installed personnel at every federal agency to talk about environmental justice inequality issues. And so as we’re examining this and to Josh’s point, this really plays a benefit to everyone in every community. Shannon: Whether or not people are recipients of kind of utility scale solar or individual developer solar, or community solar projects that are being held. And especially for public power and nonprofit entities, this is a game changer. Their ability to really transition and put resources behind clean energy technologies, whether it’s carbon capture or solar or what have you. Shannon: It is really crucial at this moment in time. And I think especially when America has gone through so much. We are in an economic recovery period. We are starting to come out a pandemic. We are looking ahead towards COP26 and the UN meeting in Glasgow next month, where’s America going to lead. And so I think this administration is really, really supportive of not only everything we can do to achieve the climate goals that they’ve set out, but also the equality goals that we’ve got to bring. Shannon: And frankly, America can lead in this. We’re seeing equality and supply chain issues in places outside of America that are really troubling and troubling to a lot of members of Congress. So getting at that point, unleashing 100% direct pay will really enable us to make a huge difference for so many here. Jon: Yeah. Thanks. I do want to transition next. So I’ve seen some questions come in. We will definitely get to those. So please ask your questions in the Q&A chat box and specifically talk about storage for a second and turn to Chris. Chris even if we just pass the ITC and storage gets an ITC and we don’t pass direct pay, it’s still going to be a challenging market for the storage developers to get a tax equity investment versus as we talked earlier sort of the vanilla solar space and 100% direct. Pay can really help accelerate that. First can you talk a little bit about Stem does and then talk about the storage ITC? Chris: Sure. Yeah, no, thanks so much, Jon, for inviting me to be on this terrific panel, very timely and important, and thrilled to be on here with so many great subject matter experts. It’s an exciting time here and chaotic time here in our nation’s capital where I reside. There’s four big issues that Congress is trying to deal with here. Actually, let me take a quick step back. Who is Stem? Stem is a smart energy storage solutions provider that leverages our artificial intelligence platform called Athena to optimize batteries on behalf of our customers. Chris: And that can mean utility bill optimization, demand charge, management savings, participating in grid services and realizing those revenue streams. And we work primarily through the developer channel to develop projects on behalf of our customers, primarily to date behind the meter, CNI customers. But going forward, I think the front of the meter utility scale projects in the number of markets that we exist today and operate, but there’s going to be a lot more if we get that the standalone storage ITC, especially if we get it with direct pay. Chris: So I’ll segue into kind of where we are today. It’s like I said, a very kind of chaotic and tumultuous time in Washington. There’s four big issues that Congress is trying to deal with before the end of the year. The first is the debt limit, to make sure that we don’t default on our debts. And Congress recently kind of kicked the can down the road on that until December 3rd. The second big issue at play is keeping the government funded and open. And again, Congress temporarily extended that through a CR, a continuing resolution also until December 3rd. And why I mentioned those and why that’s important is because that now creates a little bit of kind of breathing room and runway for Congress to really focus on the president’s domestic agenda. And there’s two big bills that are relevant to that. Chris: One is called the BIB or the bipartisan infrastructure bill, but known as the hard infrastructure bill. Has clean energy and some climate provisions in it, but more on the hard infrastructure, broadband, water, sewers, roads, bridges, et cetera. Some EV stuff in there as well. And then the second big bill that they’re focusing on is the Build Back Better Act, also known as reconciliation or the human infrastructure bill. Chris: And that is the bill that has the clean energy tax title and got a standalone storage and investment tax credit. There’s a little bit of feuding, intraparty squabbles taking place between kind of the two different factions of the Democratic caucus right now, the progressives versus kind of the more centrists and moderates. And the moderates would prefer to pass the bipartisan infrastructure or hard infrastructure built ASAP. It’s already pass the Senate with overwhelming support, 69 to 30 back in August. Chris: And the moderates were promised a vote on that by the speaker by the end of September. The progressive win of the Democratic caucus would like to link that with the reconciliation bill in fear that the moderates will vote for the infrastructure path, the bipartisan package, and not vote for reconciliation, which has some more, if you will controversial items, at least in their minds with regard to corporate tax raises, some of the social programs and climate change, et cetera. Chris: So the bottom line is right now, we’ve got the next few weeks where leadership is really trying to negotiate between the two different disparate factions of the Democratic caucus and build consensus and try to get both of them passed by a self-imposed deadline of October 31st. So just about 18 days from now. And that date is significant because I think as Shannon said, the administration has placed a big emphasis in prioritization on clean energy and climate change. Chris: And the president would like to travel to the COP or the COP or council of parties event in Glasgow at the beginning of November, with something in hand to demonstrate not only that we’re… To demonstrate that actions means more than words. That’s not just rhetoric. We actually have policy here in hand, and we’re going to help provide leadership to the rest of the world on that front. The questions that are at play is can they build consensus? Can the president show up a COP with something? And then what about outside events? Inflation, the border crisis, president’s sliding poll numbers, how does all that impact over the next couple weeks as we try to build this consensus. Carly, if you can go to the next slide, please. Chris: So what exactly is in the bill as it relates to direct pay and the standalone storage investment tax credits. So in the House ways and means reconciliation draft that will eventually be compiled with a much broader reconciliation package from other committees, they have a base credit of 6%, and then what they call a bonus credit of up to 30% ITC, if you meet certain prevailing wages and apprenticeship requirements. It’s for 10 years. So through the end of 2031. Chris: They also have a bonus or an adder of 10%, if you can source domestic content. This is again, if you’re electing to take direct pay either because you have tax appetite or you’re going to monetize it through resourcing tax equity. But the reason we’re here today is to talk about direct pay. And unfortunately there is a direct pay provision in the ways and means wrapped, and we fully expect the Senate will have something similar, if not exactly the same in their package when we get to that point in time. Chris: And through the end of 2023 developers projects can claim direct pay at 100% of the ITC value. And then beginning in 2024, through 2026, there is a requirement to actually meet domestic of content. So, whereas it’s an adder, if you take ITC, it becomes a requirement in 2024, and if you can’t meet it, then you get 90% of the value. In 2025, if you take direct pay, but can’t meet domestic content it’s 85%. And then in 2026, through the end of the duration of the credit, so 2031 in this case, it’s 0% if you can’t meet domestic content. Chris: And one of the things we’ve been doing as an industry is not trying to oppose domestic content. We understand the intent behind it and the rationale, but the reality of the situation is we don’t have enough supply and domestic capacity right now to meet broader carbonization goals and the acceleration of the clean energy transition that the administration is really trying to accelerate. Chris: So we’re trying to make sure that they understand we’re not opposed to this, but maybe those dates are a little bit too aggressive. And if the question is what does Direct Pay really do for the storage industry. As lot of things that Melinda and Shannon and Josh already said, it gets dollars in hands of the developers quickly. It can allow new market interests and new markets literally to open up overnight. So there are a number of tax exempt entities, rural electric co-ops in kind of the Heartland of America and Munis, and even native American tribes that would like to do more renewable energy, would like to do more storage, but it’s costly, it’s cumbersome, it’s time consuming. And they have to, as a tax exempt entity go out and source really tax equity, which again, as we’ve said is kind of an illiquid market that’s concentrated in a small number of very large banks. Chris: And so to date, they haven’t really done a lot of these projects, but with direct pay and them able to just get those funds almost immediately, it really would open up the market. I think Wood Mac a very reputable consultancy firm, et cetera, their recent analysis showed that with just an ITC for storage, the total addressable market would increase 20% to 25% against their previous baselines. Now they haven’t modeled direct pay into that. Chris: They said that’ll be in their next iteration in December. But when I was talking to them about it, they said it would be absolutely transformational if direct pay is allowed for not just storage, but also the other clean energy technology. So wind and solar certainly. And the last thing that I would say is if we are going to truly be able to achieve this administration’s broader decarbonization goals, whether that’s you at zero by 2035 or 2040, or even 2050. Pick your date, there’s not enough tax equity out there to absorb all these projects. That supply demand and balance that has been referenced a couple times. So direct payment really could be transformational, could catalyze the market and really is a game changer. Jon: Yeah. Thanks, Chris. I have a question for you and Stacy, before we sort of get to the current state of play and some action. I’m sorry, you and Shannon. Under direct pay, the other benefits, the other tax benefits are not affected. They still have depreciation and other key tax benefits involved. Chris: Yeah, that’s correct. Absolutely right. They will not be impacted. And I think it gets back to, somebody made the comment, with direct pay and ITC, et cetera, this isn’t an either, or this is an and. This is just going to really have a true kind of catalyzing effect on the marketplace, open up new markets overnight, projects that might have just been on the cusp. And the developer was waiting for tax equity and projects were delayed because of that. This is truly going to be able to get more shovel ready projects going and create jobs and help us get clean energy. Or not get to, but accelerate the clean energy transition. Jon: And a reminder, put your questions in the Q&A box, not the chat box, but we do have one in the chat box. And I think I can answer, but basically with direct pay, it’s just like the ITC where the actual customer could monetize it if they want to versus a third party, who’s doing a PPA. So as Chris said, it’s an and not an or. Chris: Yeah. That’s been, as I said, that’s been a huge constraint for a lot of like tax exempt entities that I’ve mentioned too, want to do these projects, but are tax exempt. And it can be very cumbersome for them. So direct pay unlocks that market. Jon: And it does coexist with the ITC. Again, it’s not either. So if there’s… Without any other questions, I want to turn to Shannon for a second. As Chris talked about a little bit of the state of play and the current legislation that’s in Congress. First of all what do the next couple weeks look like and what actions can we take as part of the industry to really drive change here? Shannon: Absolutely. And I might just beg your forgiveness to do a little deeper dive on what Chris said. Jon: No, please do. Shannon: I can’t resist. It’s my DC nature here. So what we have is pretty complicated and messy, no doubt about it. If you’ve been reading the papers or Twitter or anything else you’ve got two very different legislative processes, essentially operating under different rules, merging together in this single battle royal, if you will. Shannon: So, as Chris mentioned, you’ve got the infrastructure bill, which is really a classic infrastructure. It’s got surface transportation, broadband, water infrastructure. That was moving through Congress under, well, we have a traditional rules process. It received a lot of attention this summer when it was negotiated by a bipartisan group of senators. Senate passed that bill in early August with enough votes to actually overcome a Senate filibuster, which is 60 votes. Really important. That infrastructure bill includes a lot of the president’s priorities, but certainly not all of them. Shannon: And certainly as we look to some of the things that we’ve mentioned about equality, justice aspects, really a community focus, that’s not where you’re going to find a lot of it. So on the other hand, you’ve got the reconciliation process. Which is a privileged process where a simple majority of 51 can pass a spending and tax measures bill following a budget resolution that basically instructs the process. Shannon: So although direct pay, as we know, enables energy infrastructure, it actually fits more squarely into that reconciliation bucket. That privilege process fundamentally functions as a component of our tax policy. So that’s where a lot of our advocacy efforts are focused right now. This is all coming down to a numbers game, frankly. The number of votes to be had, and the top line budget number. As Chris mentioned, a lot of moderates on both sides of the fence, on the political fence, aren’t comfortable signing on to a three and a half trillion dollar budget bill. While progressives are demanding a higher spend with critical priorities, such as climate change and social expenditures. Republicans, aren’t going to go near this reconciliation bill to save their lives. Shannon: This is a Democrat run process. So the Democrats have to lock in every vote, especially on the Senate side. Remember we’re tied with the vice president being the final vote that puts Democrats over the edge here. And in the House. You’ve got a very similar dynamic. You’ve got, I think, 220 Democrats to 212 with a couple vacancies. So this is a tough battle. You’ll see this week more and more coming out as we’re in this recess period, that leadership is examining where to… I think that the terms that they’re using right now are slash and trim. Which sounds a little bit more like vegetation management than budget issues. And what we’re focused on in is that you’ve got kind of the climate change bucket of provisions currently being discussed. This includes tax incentives and direct pay for clean energy. Shannon: You’ve got the clean electricity performance program, which is really geared at utilities. You’ve got a potential price on carbon that’s being discussed. Carbon border tax has its deficiencies, civilian climate corps, a few other things. Something in that bucket is going to be going to be eliminated. Senator Manchin, who’s been very public on his use about some of the climate issues is not a fan of the CEPP. Perhaps we have our answer there. So Senator Manchin, Senator Sinema, they’re the kind of two popular holdouts, I’ll say, on the Democratic Senate side. But the House has its own challenges as well. From a timeline perspective, again, leadership has set another deadline for the end of October ahead of the UN climate conference that we’ve referenced. So our unified advocacy on this issue is really, really crucial right now, as lawmakers are making these difficult decisions, weighing what should be in and what should be out. Shannon: So Chris touched on some of the legislative momentum that we’ve had, and it’s been phenomenal. I’ve covered a number of energy issues over the years on Capitol Hill. And really this one, especially over the last six months where we’ve really been out advocating on this issue has really become a game changer. We now have legislation in the House and set it that are supportive of 100% direct pay. Whereas at the beginning we were having conversations of why should we even consider direct pay? So we’ve made a world of difference already. You’ve got legislative champions like Senator Carper, Senator Wyden, and Congressman Blumenauer, all of them with various differences in their, in their legislative intent, but supportive of 100% direct pay. So I think one of the questions that I saw in the chat was does, does direct pay really apply to everyone. Shannon: And the answer is, it depends. It depends in the end on what version of the legislation that’s been sponsored by these members gets absorbed and accepted into a reconciliation package. It also depends on the number of clean energy entities that are filling that tax equity pool as we discussed. Who else is going to get a PTC and ITC? All of that influences the total, what we call score, how much provisions cost. One of the great things about 100% direct pay. We saw this in the markup that chairman Wyden did, and back in May, scores very, very low, which means it doesn’t cost a lot to do a world of difference here in terms of advocating and really advancing our clean energy goals. And so we’ve had a lot of letters of support and we had 186 members sign on to a letter to leadership. Shannon: We are absolutely optimistic that 100% direct pay is going to make it in the end. All of that to say, we have a long road to go. We have essentially three weeks of a lot of advocacy. And so Jon, you asked what can folks do? How can they make a difference? One thing, reach out to us. If you’re interested. You’ve got the website contact us page right in front of you. We are on Twitter, we’re on LinkedIn. So please follow us. We’re @cleanenergy, LinkedIn, it’s the Partnership for Clean Energy Investment, reach out if you’ve got questions too. We’ve put up some templates here that we’ve just designed. One of the things that folks and members on the hill really want to hear from their constituents on what matters. Shannon: So if this is something that is rising to your top priorities, we would love to help you draft a letter to your member of Congress, whether as an individual or as a part of your companies that you’re representing and really tell your story, have them understand if you can’t kind of be here in Washington or meet with them individually, have them see in black and white and request that they respond back to you. This is a way to elevate our engagement and also let them see that this is not just a handful of companies or even kind of the usual trade associations that they hear from. They want to hear the heartland. So hopefully that helps Jon. Jon: No, Shannon. That’s great. And I’m going to drive this a little harder. There’s a few questions I’ll get to here in a second, but the reality is we’re going to send out these letters, we’re going to put the link out there. So you can reach out to the Partnership for Clean Energy Investment and get help. Jon: But the reality is this isn’t about where your company’s head quartered. It could matter if you’re in Tucson Arizona, for instance, but think about where you have projects, where you have employees and think about your footprint. Most folks on this call don’t have policy shops or have very limited policy shops to do this work, but it shouldn’t take that much effort to put your name on a letterhead and Shannon and team will help you send this in. That impact can be significant. If you’re willing to even step up further and lend your voice with a meeting with staff or a phone call, especially in targeted states like West Virginia and Arizona. I’ll say it again, West Virginia, Arizona. West Virginia, Arizona. We can get this over the goal line and help drive us forward. By the way, any other key states, Shannon, you think are important for of folks? Shannon: I mean, I think a lot of states that we typically hear from in the climate change and clean energy conversation are the Northeast and California. There’s a whole swath of our country that aren’t those states. I think it’s really important as you expressed, no matter where you are, you’re projects help so many. And so let’s have a chat, let’s look at your footprint, let’s see where you’ve got potential projects that could be on the line here. Where could direct pay have really put a project in the ground, put people to work and benefited a number of customers with clean energy. Jon: Absolutely. I mean, one of the things we did, we’re in 19 different states at Clean Capital. So we were able to sort of identify where those are and have an impact with those folks. So please go to the PartnershipforCleanEnergyInvestment.com. We can always reach out to us at Clean Capital. Carly will send around more information to drive some action. There are a few just remaining questions. I think it’s important to note to folks that when a piece of legislation passed, there’s still rules that need to be put together and how this all works. So all of the details are not 100% defined just because it’s in the legislation. So this will end up, if it passes, when it passes, let’s be positive. When it passes, it goes the administration. And then for instance, the IRS will structure the rules that this will live within. Jon: So there will be a period of uncertainty post the passing of what things look like. So some of your questions around sequestration, for instance, or like, what are the mechanics compared to 16-03, we just don’t actually know yet until those things are driven by the bureaucrats who will wrestle with it. Jon: I do want to point to what Todd said, Todd Glass specifically made a really important point where there’s going to be a shift in… People will still be providing tax equity, for sure, but they’ll also be providing debt in a new aggressive, innovative way. And I think that would be an exciting part to the market and really provide opportunities. There’s so many benefits that direct pay brings to our industry. It’s just critical. We’re at that critical moment that it has to happen. This is probably like a once in a generational climate set of legislation that needs to get done. Jon: And it’s up to us as the industry to push forward. Because if someone asks about opposition, there’s not a whole lot of opposition to direct pay itself. There’s opposition to driving clean energy. And that opposition has been entrenched for decades. It’s up to us as the industry to push back on that and lend our voices to the conversation. So thank you to everyone for are joining as thank you to all the panelists for being part of this. I’m not sure if anyone’s got any final words. I’m just going to say, take some action. We need to do it today. Chris: Then I would just say to kind of conclude everything, again, call to action sign up, go to the website. If you’re willing to lend your voice, go to staff meetings. I’m a kind of eternal optimist. And I’m a Mets fan. So I got to be that way, World Series. Jon: And a Bills fan. Chris: And a Bills fan. Jon: Paying off now. Chris: But I do think that the leadership of the House, the Senate, and certainly the white house, it’s a deft and they have to thread the needle. But I think they, as you just said, recognize, this is truly a generational opportunity and they’re going to put the full court press on, but they need to hear from their constituencies. They need to hear from people that are waiting to do and develop projects in their respective congressional districts in their states. So can’t underscore enough how important that is. We have projects that we’re talking with developers, probably some of the folks on this phone that are just kind of paralyzed right now, while we’re waiting for this to hopefully get across the finish line. So do everything you can to advocate for because it is absolutely critical and would be a game changer. Jon: Absolutely. Go ahead, Shannon, sorry. Please. Shannon: No, sorry, Jon. I was actually just trying to respond to the 16-03 questions. Yeah. I dropped a link into the chat. Actually. We’ve done a fact sheet on 16-03, but as Jon noted, there are some strong comparisons to 16-03 and frankly, 16-03 was a success story. It proved that for essentially every federal dollar that went into that program, you had about $2 to $3 of private capital that expanded on clean energy development. Shannon: So there’s a lot of great stuff in there in terms of the specifics as Jon noted, there’s a lot to be hashed out when this comes out of the rents would be the federal agencies. But one of the advantages of direct pay is that you essentially have the syStem already set up. There’s not a new agency. There’s not a new bureaucracy that needs to be created. It will really be one of the more efficient things that we can do to impact clean energy development in this country. So happy to talk offline about 16-03 or any of these other issues. Jon: And it’s important to note, as I said, the mechanics are still being worked out. So I know there’s some questions about that, but I think Shannon’s fact sheet addresses some of it. And the reality is some of it just, we won’t know until this actually passes and the administration can work through it. But their overall intent is to make this efficient, and really try to drive the market forward. Well, thank you to everyone for joining today. Please reach out to us at Clean Capital or to Shannon as well. And please, this is the moment that we all have to take action to help move our industry forward. So please do something as soon as possible.