The United States has a strong established renewable energy industry. According to the U.S. Energy Information Administration (“EIA”), in 2023, about 4,178 billion kilowatt-hours (“kWh”) of electricity were generated at utility-scale generation facilities. About 60% of this generation was from fossil fuels (coal, natural gas, petroleum, and other gases); about 21% was from renewable energy projects, and 19% was from nuclear power plants. As of December 2022, there were 1,509 wind utility-scale generators; 5,777 solar photovoltaic utility-scale generators; 13 solar thermal utility-scale generators; 2,028 biomass utility-scale generators; 171 utility-scale geothermal generators; and 4,005 hydroelectric conventional utility-scale generators. The EIA estimates that an additional 62.8 gigawatts (GW) of utility-scale solar photovoltaic systems will be installed in 2024, which would represent 55% more capacity than was added in 2023 (40.4 GW).

EIA projects that renewable generation will increase from 21% in 2021 to 44% of U.S. electricity by 2050. Renewables accounted for 22% of total U.S. generation in 2023.  In 2024, solar is expected to account for 58% of new capacity, followed by battery storage at 23%. In contrast, EIA expects that the share for generation from coal will decline 18% from 2023 to 2025, and the share from natural gas will decline from 39% to 38%.

Regarding production levels in 2023, renewable energy sources (including wind, conventional hydroelectric, solar, biomass, and geothermal energy) generated 874 billion kWh of electricity. Only natural gas (1,689 billion kWh) produced more electricity than renewables in the United States in 2023, and the share of electricity generated by natural gas is expected to remain the same in 2024 and 2025. Renewables surpassed both nuclear for the first time in 2021 and coal for the first time in 2022.

When the United States rejoined the Paris Agreement in 2021, it committed to achieving net-zero emissions economy-wide by 2050.  Pursuant to that goal the United States also set its nationally determined contributions (“NDCs”) as required under the Paris Agreement and committed to cutting emissions between 50 and 52% from 2005 levels by 2030.

The United States’ carbon reduction targets are not codified in law. However, the country has been on track to meet its commitment of reducing carbon emissions by 25% below 2005 levels by 2025. As per the NDCs, the United States has set a goal to reach 100% carbon pollution-free electricity by 2035.

The Biden administration has continued its aggressive effort to fulfil its NDCs through various programs. Those include the Infrastructure Investment and Jobs Act of 2021 (“IIJA”), the Creating Helpful Incentives to Produce Semiconductors Science Act of 2022 (“CHIPS”), and the Inflation Reduction Act of 2022 (“IRA”). Although the U.S. Supreme Court decision in West Virginia v. Environmental Protection Agency raised some questions about the Biden administration’s ability to rely on federal regulation to advance its carbon reduction policy goals and objectives in the absence of new federal legislation, the Biden administration has proposed controls on greenhouse gas emissions (“GHG”) from power plants. If implemented, the proposed regulation will limit emissions for coal and certain gas power plants through caps on pollution rates.

Yes, there is a legal definition of renewable energy in the United States set forth in the Renewable Energy Resources Act of 1980. As per 42 U.S. Code § 7372, the term “renewable energy resource” means “any energy resource which has recently originated in the sun, including direct and indirect solar radiation and intermediate solar energy forms such as wind, ocean thermal gradients, ocean currents and waves, hydropower, photovoltaic energy, products of photosynthetic processes, organic wastes, and others.” In addition, the Energy Policy Act of 2005 (“EPAct 2005”) defines “renewable energy” as “marine energy [], or electric energy produced from solar, wind, biomass, landfill gas, geothermal, municipal solid waste, or new hydroelectric generation capacity achieved from increased efficiency or additions of new capacity at an existing hydroelectric project.”  42 U.S.C. 15852(b)(2). Accordingly, EPAct 2005 refers to renewable energy resources as those “including solar, wind, biomass, ocean (including tidal, wave, current, and thermal), geothermal, and hydroelectric energy resources.”  However, this definition is not expressly referenced in the IRA, IIJA, CHIPS or other relevant energy legislation. The term renewable energy is used in those laws without a specific definition.  There are other examples of terms used to describe renewable energy resources.  For example, Section 45Y of the IRA provides that clean electricity production tax credits will be available to “qualified facilities” placed in service as of January 1, 2025, and such facilities are defined as those “for which the greenhouse gas emissions rate […] is not greater than zero.”

In the United States, jurisdiction over electricity is divided between the federal government and the states. At the national level, the Federal Energy Regulatory Commission (“FERC”) has authority over transmission and wholesale sales of electricity in interstate commerce. The states and territories have jurisdiction over distribution and retail sales. Each state has a public utility commission or similar body, and Puerto Rico has the United States’ largest publicly owned utility as well as a separate regulatory board. Additionally, the U.S. territories of American Samoa, Guam, the Northern Marianas Islands, and the U.S. Virgin Islands each has its own public utility.

The North American Electric Reliability Corporation (“NERC”) helps ensure the reliability of the North American bulk electric system, which is divided into three independent interconnections: Eastern Interconnection, Western Interconnection, and Electricity Reliability Council of Texas (“ERCOT”) Interconnection. FERC regulations also enabled the establishment of independent, nonprofit organizations that serve as regional transmission operators (“RTOs”) or independent system operators (“ISOs”).

NERC assesses the system’s reliability, develops reliability standards, and has the authority to enforce standards. FERC approves proposed standards and directs NERC to develop modifications to reliability standards in an ongoing process that is designed to respond to changing market and transmission system conditions.

At the state level, the permits required and the process for obtaining permits will vary depending on the jurisdiction. Some states have a single agency or siting authority that manages the permitting process for all solar projects and other large utility infrastructure within the state. By contrast, in other states, the developers may have to obtain permits from multiple state and local agencies.

In addition to the applicable energy regulations, federal, state and local environmental and natural resources laws may also apply to projects and require analysis that can shape the development of the project and materially affect timing and cost. Certain projects may be required to prepare detailed environmental impact assessments and obtain certain environmental permits that require retaining experienced environmental consultants and counsel to lead the environmental review process. Determining which regulations apply and which agencies have jurisdiction will depend on factors including the siting of the project, protected species and other impacts, project alternatives, the type of technologies employed, and whether the project will apply for or receive government funding.

For example, the development of a renewable energy project on federal lands requires the involvement of certain federal agencies and also requires the completion of a National Environmental Policy Act (“NEPA”) review. Projects seeking grants or loan guarantees from the U.S. Department of Energy (“DOE”) also require NEPA review. The location and technical details of wind and biomass projects may trigger requirements for air, noise and other environmental permits. Experienced environmental and resources counsel should be engaged early in the development process.

Many private sector participants are joining the energy transition. Investors of all sizes have committed to net zero carbon pledges. Public and private corporations in various industries have also made net-zero commitments. Some of these efforts are discussed in Questions 5, 13, 18, and 19 below.

As in the past, project developers have been at the forefront of developing renewables projects and expanding the range and scale of technologies being deployed across the country, including battery and energy storage (standalone or added to generation projects) and innovative applications combining electric vehicle (“EV”) charging stations and storage, micro grids, demand response, distributed energy resources, and hydrogen production and storage. In addition to traditional bank lenders and tax equity providers, project developers continue to tap equity and debt investments from private equity (“PE”) funds and other institutional investors to scale up their companies and their ability to complete projects on an increasingly larger scale. We also see more consumer-facing businesses, including retailers, manufacturers, tech companies, and banks, looking to fulfil their net zero commitments through power purchase agreements (“PPAs”), virtual power purchase agreements (“VPPAs”), and other offtake agreements, as well as other partnerships and investments with companies developing renewable energy projects. Lastly, we see a continued push by large investment funds, institutional investors and banks to provide equity and debt financing for companies involved in the energy transition space.

Businesses are continuing to procure energy from renewable sources through a number of different arrangements, primarily through PPAs, VPPAs and other offtake arrangements. In addition, we continue to see companies that are not utilities and are outside the energy sector shifting to renewable energy, and even getting involved with development, particularly now with the volatility of the global fuel markets. VPPAs and other corporate power sourcing instruments are increasingly common.

For example, several large technology companies, manufacturers and other large electricity users have adopted plans and policies to reduce their carbon footprint, including by committing to gradually switching their source of power for their operations to 100% renewable energy. Specifically, we have seen a number of large PPAs signed that provide renewable power to data centers. In 2023, corporate offtakers represented 21% of clean power operating capacity.  The market for these products is expected to continue as electricity demand is expected to grow a cumulative 4.7% over the next 5 years, up from last year’s estimate of 2.6%.

The overall approach has not significantly changed in the past year although a combination of factors, including inflation, the impact of interest rates on the cost of capital, supply disruptions and delays in obtaining interconnection for new projects have delayed new generation projects.  Nevertheless, the IRA continues to create new opportunities for companies to decarbonize and pursue renewable energy development, which has continued to increase.  The Treasury Department and the IRS have been issuing guidance on many of the new programs and that guidance has allowed companies to clarify their plans.  Additionally, the IRA allows for the transfer (i.e., sale) of tax credits from renewable projects which lowers the hurdles for companies to take advantage of the credits without having to develop expertise in often complex tax equity structures.  Recently, final regulations were issued on the tax credit transfer rules, largely adopting the proposed rules issued in 2023. The tax credit and other IRA provisions are discussed in more detail in Question 13.

As more companies consider ways to get involved in the energy transition, there continue to be calls from an increasingly diverse group of stakeholders to resolve transmission constraints. This is in part a result of the growing recognition that such constraints represent a significant hurdle to reaching renewable energy targets.

In contrast, there has been political backlash to certain forms of “ESG” investing that has led to investors to be more cautious in publicizing their commitments.

As described in the examples provided in answers to Questions 5 and 6 above, discussions and initiatives in the U.S. business community about reducing carbon emissions are often publicly reported by companies in the press and in periodic reporting of publicly-traded companies, particularly among public companies and companies in consumer-facing industries.  In addition, higher economic growth in the U.S. in manufacturing and the increased computing requirements of technology companies because of AI (which has led to a greater demand for data centers) have brought renewed attention to the accompanying carbon footprint and opportunities to address that demand with renewable energy.  Regarding political and regulatory support to this area, there are both federal and state support measures aimed at increasing reduction emissions across all economic sectors. Given the variety of state programs, this answer will focus only on the federal level, with the exception of certain recent developments in California related to climate disclosure.

The Biden administration has advanced and supported public policies to rapidly increase reductions in greenhouse gas emissions. In enacting the IRA in 2022, the Biden administration secured the largest investment to date to advance energy security and to combat climate change in the United States. The IRA’s key energy and climate provisions include the following:

• Authorizes an additional $40 billion for the Innovative Clean Energy Loan Guarantee Program (Title 17) run by the DOE Loan Program Office (“LPO”) and described in Question 9 below;
• Creates the Energy Infrastructure Reinvestment Program with up to $5 billion through fiscal year 2026 to support loan guarantees up to $250 billion for energy infrastructure-related projects;
• Extends and expands federal production tax credits (“PTCs”) and investment tax credits (“ITCs”) for renewable energy, thermal storage, and other technologies;
• Introduces new federal income tax credits for carbon capture and storage technologies, as well as electric, hybrid and hydrogen fuel cell;
• Provides R&D grants to the DOE’s Office of Science to invest in DOE labs;
• Creates an advanced industrial facilities deployment program aimed at reducing emissions from energy intensive industries;
• Allocates over $20 billion to the Office of Clean Energy Demonstrations (“OCED”) to create regional production hubs and to promote the scaling of new technologies;
• Creates a new $5.8 billion program under the OCED directed to iron, steel, concrete, glass, pulp, paper, ceramics, and chemical production;
• Appropriates $150 million for the Office of Energy Efficiency and Renewable Energy for infrastructure and general plant projects through 2027.

The IIJA represents the second largest investment in climate and energy. It appropriated more than $62 billion for the DOE in the coming fiscal years and created 60 new programs, including the OCED. The OCED was established to support large-scale pilot projects for clean hydrogen production, carbon capture, grid-scale energy storage, and advanced nuclear reactors. The IIJA also provided the LPO with substantial appropriations for several loan and loan guarantee programs to support the commercial deployment of innovative clean energy and advanced transportation projects. The programs include $8.5 billion for advanced fossil projects; $10.9 billion for advanced nuclear projects; up to $17.7 billion for Advanced Technology Vehicle Manufacturing; and up to $2.1 billion to the Carbon Dioxide Transportation Infrastructure Finance and Innovation Program (“CIFIA”) for loan guarantees and grants to support CO2 transportation infrastructure projects. As a result, DOE is able to offer long-term, low-cost financing with interest rates equivalent to Treasury yield curves to eligible projects under the CIFIA program.

The CHIPS Act authorized over $67 billion for DOE research and development programs including the first-ever comprehensive authorization for the DOE Office of Science. This authorization includes prioritizing research in fusion energy science, high energy physics, and nuclear physics, among others. It also includes several new DOE programs focused on research and development in emerging technology areas such as steel emissions reduction methods and microelectronics.

More recently, DOE announced approximately $6 billion in funding under the Industrial Demonstrations Program to accelerate decarbonization projects in energy-intensive industries, including the production of steel, aluminum, chemicals, and concrete.

Significant measures are also being adopted at the federal and state level to spur greater disclosure of GHG emissions, climate risk, and carbon offset activities. Highlights in this milieu include the following:

• On March 6, 2024, the Securities and Exchange Commission (the “SEC” or the “Commission”) voted 3 to 2 to adopt rules requiring registrants to provide additional climate-related information in their registration statements and annual reports, including in their financial statements. Currently, implementation of the rule is voluntarily stayed by the Commission pending judicial review of challenges in federal court.
• The Commission modelled the rules in large part on the recommendations of the Task Force on Climate-Related Financial Disclosures and the Greenhouse Gas Protocol. At a high level, the rules require: (i) a description of any climate-related risks that have materially impacted or are reasonably likely to have a material impact on the registrant; (ii) disclosure regarding a registrant’s activities, if any, to mitigate or adapt to a material climate-related risk or use of transition plans, scenario analysis or internal carbon prices to manage a material climate-related risk; (iii) disclosure about any oversight by the registrant’s board of directors of climate-related risks and any role by management in assessing and managing material climate-related risks; (iv) a description of any processes the registrant uses to assess or manage material climate-related risks; (v) disclosure of Scope 1 and Scope 2 emissions on a phased-in basis for some registrants, if material; and (vi) disclosure of the effects of severe weather events and other natural conditions including costs and losses on the registrant’s financial statements.
• On October 7, 2023, California adopted a new set of far-reaching climate laws in the form of SB 253, the Climate Corporate Data Accountability Act (CCDAA), and SB 261, the Climate-Related Financial Risk Act (CRFRA) (collectively, the “California Climate Accountability Regime”).1 Because of the sheer size of the California market—the world’s fifth largest economy—the new legislation effectively will re-shape the Environmental, Social and Governance (“ESG”) and climate transparency debate far beyond the state’s borders. The CCDAA requires public and private companies “doing business” in California, with total annual revenues exceeding $1 billion in the prior fiscal year, to publicly report their direct and indirect GHG emissions.  The CCDAA categorizes GHG emissions by scope, requiring companies to publicly disclose Scope 1 and 2 emissions starting in 2026, and Scope 3 emissions starting in 2027.  The CRFRA requires public and private companies “doing business” in California with annual revenues exceeding $500 million to prepare a biennial climate-related financial risk report. The report must disclose the company’s (i) climate-related financial risk, and (ii) measures adopted to reduce and adapt to climate-related financial risk. “Climate-related financial risk” is defined in the bill as material risk of harm to immediate and long-term financial outcomes due to physical and transition risks, e.g., risk to corporate operations, provision of goods and services, supply chains, employee health and safety, capital and financial investments, institutional investments, financial standing of loan recipients and borrowers, shareholder value, consumer demand, and financial markets and economic health.
• Also on October 7, 2023, California enacted Assembly Bill 1305, the Voluntary Carbon Market Disclosures Business Regulation Act (VCMDA), which requires businesses marketing or selling voluntary carbon offsets within the state to disclose on their website specified information about the applicable carbon offset project and details regarding accountability measures if a project is not completed or does not meet the projected emissions reductions or removal benefits. The VCMDA also requires any entity that purchases or uses voluntary carbon offsets that makes claims regarding the achievement of “net zero” emissions or other, similar claims, to disclose on the entity’s internet website specified information, i.e., how, if at all, a claim was determined to be accurate or actually accomplished, how interim progress toward that goal is being measured, and whether there is independent third-party verification of the company data and claims listed.

In addition to the energy and environmental regulatory authorizations and permitting requirements described in Question 4 above, a developer typically starts the development of a new project by securing rights to (i) a project site and (ii) connect the project to the existing electricity grid or transmission system. The selection of the project site often is interrelated with the potential options for interconnection, and those rights may be shaped by the potential options for securing long-term offtake agreements and contracts for the sale of the power or capacity (or even the sale of the project itself in the case of build-transfer agreements).

The process of securing the rights to the project site and the related transmission and interconnection infrastructure can vary depending on the location and the counterparty who can grant the rights. Rights in a site are typically obtained through long-term leases, easements, rights-of-way, licenses or permits, and counterparties can range from private landowners and leaseholders to federal, state, local, and tribal government entities, agencies and other bodies. For example, when developers propose to build renewable energy projects on federal land managed by the U.S. Bureau of Land Management (“BLM”), the BLM, in coordination with other agencies such as the U.S. Fish and Wildlife Service and state and local authorities, is authorized to permit development of solar and other energy projects. Permits and rights-of-way are typically awarded after the completion of any NEPA review. The Bureau of Ocean Energy Management (“BOEM”) oversees the leasing process for offshore wind. The process of securing interconnection agreements can vary depending on the party that owns or operates the transmission or distribution system where the project wishes to interconnect. Those parties can range from utilities to independent and regional systems operators. In any case, the developer will need to negotiate some form of interconnection agreement based on the forms used by those parties, which may be based on a form specifically used by that party and may require a certain commitment by the project to complete certain network upgrades. Those interconnection agreements may require additional approval by the relevant regulatory authority.

In addition, certain types of renewable energy projects also require special licensing, authorizations and permits related to their development, construction, and operation which can turn on the location of the project. Geothermal projects may require special permits to use the geothermal resources. For example, the State of California requires a geothermal resources prospecting permit. Non-federal hydropower projects require specific licensing and permitting from the FERC under the Federal Power Act and certifications and authorizations from other government agencies pursuant to other statutes regulating hydropower, including, but not limited to, NEPA, the Clean Water Act, the Coastal Zone Management Act, the Endangered Species Act, the Fish and Wildlife Coordination Act, and the National Historic Preservation Act. Again, the siting of the hydropower project impacts which agencies, statutes and requirements may apply.

Beyond the generally applicable permits that most projects will need, there are additional technology-specific permits. For example, nuclear power plants require permits from the Nuclear Regulatory Commission (“NRC”). Historically, the NRC required that plants obtain separate construction and operating licenses. In 1989, the NRC introduced a combined licensing application. However, only two nuclear units have come online in the past two decades. As discussed in Question 19, the NRC is considering revising its permitting process.

Carbon capture projects also require Class VI permits from the Environmental Protection Agency (“EPA”) in order to drill the wells necessary for storing carbon underground. Currently, there are three dozen permit applications pending before the EPA. Projects will also need to obtain the rights to inject and store carbon underground.

Projects producing hydrogen require a variety of permits for construction. There are about 1,600 miles of hydrogen pipeline in the United States. Currently, regulation of their siting, commercial service, security, and safety is divided among federal agencies and the states.

Over the past few decades, federal, state, and local governments have enacted policies to encourage the renewables sector, but except for a handful of exceptions, governments have not had direct ownership of renewable energy projects or companies. The federal government owns and operates significant hydropower assets. At the state level, some local governments (typically cities) operate utilities.

While not direct ownership, governments do provide various forms of financial support for renewable energy.  For example, a number of offices within the DOE focus specifically in supporting grant, loan, and financing programs for the renewables sector, including for research and development. The DOE’s Office of Energy and Efficiency and Renewable Energy (“EERE”) supports the clean energy transition with a number of initiatives, as well as the OCED. In addition to supporting grants and financing supporting research, the DOE has the LPO, which has several programs intended to provide access to debt capital for first-of-their-kind projects and other high-impact related ventures. LPO programs include:

• Innovative Clean Energy Loan Guarantee Program;
• Advanced Technology Vehicle Manufacturing Direct Loan Program;
• Energy Infrastructure Reinvestment Program (created by IRA);
• Carbon Dioxide Transportation Infrastructure Program-CIFIA (created by IIJA); and
• Tribal Energy Loan Guarantee Program.

Each LPO program has its own eligibility criteria, application process, and funding limits. As mentioned in our answer to Question 7 above, the IRA and IIJA each authorized new funding for several LPO programs.

The DOE loan guarantee and direct lending facilities may be attractive financing options for borrowers who are developing infrastructure and innovative energy-related technologies and projects, such as offshore wind, transmission, hydrogen, carbon capture, critical minerals, and advanced technology vehicles, among others.

In addition to federal programs, some states and the District of Columbia have created special government agencies referred to as “green banks” to support the deployment of renewable energy projects through a variety of financial products and technical support. For example, state green banks can offer loans supporting the installation of residential solar units, provide credit enhancements to financing agreements, and warehousing portfolios of smaller loans.

The United States’ carbon reduction targets are not codified in law. However, the federal government has adopted a “whole of government” approach to climate change, including renewable energy.

As discussed in Question 2, there are commitments under the Paris Climate Accord, and President Biden has committed to achieving 100% clean power in the electricity sector by 2035. The plan to achieve this milestone includes legislation as well as executive branch actions, from procurement to new regulations. The response to Question 7 discusses many of these initiatives. The various federal programs operate alongside a mix of state and local laws and policies.

The IRA is the most significant federal legislation as it relates to energy and climate funding. In furtherance of that goal, the IRA provides $394 billion for energy initiatives, including corporate and consumer tax incentives, grants, and loans. Those incentives will be available across the energy, manufacturing, environment, transportation, and agriculture sectors.

Since its passage, the Treasury Department and the IRS have been issuing guidance clarifying the implementation of various IRA provisions, including guidance relating to transferability of tax credits, the prevailing wage and apprenticeship requirements, the domestic content bonus and the energy community adder.

In order to maximize incentives under the IRA, eligible projects must meet certain domestic production, prevailing wage and apprentice requirements, and investment in designated energy communities. Another interesting aspect of the IRA is that it will phase in technology-neutral credits, available to all projects whose GHG emissions rate does not exceed zero.

Beyond energy-producing projects, the IRA also seeks to support domestic production of the critical minerals and components necessary to build renewable energy projects. Also, FERC’s efforts to resolve transmission and interconnection issues discussed in Question 14 would have a significant impact on the renewable energy development.

As discussed in Questions 7, 9, and 10, there are significant governmental policies at the federal and state level promoting renewable energy and the transition from fossil fuels to reduce greenhouse emissions. These policies provide significant support to the expansion of renewable energy businesses in the United States.

At the federal level, agencies and departments including the DOE and the Departments of Agriculture, Commerce, Defense, Treasury, and the Interior have implemented a slew of renewable energy-related initiatives that benefit investors, project developers, and energy producers. At the state level, several jurisdictions have encouraged project development and created robust state and regional markets for renewable energy credits. The first regional carbon market initiative in the country is the Regional Greenhouse Gas Initiative (“RGGI”), which is a market-based effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and Virginia to cap and reduce carbon emissions from the power sector.

Key federal initiatives include:

• Federal Income Tax Credits: PTCs and ITCs reduce the tax liability of renewable project owners. Legislation extending PTCs and ITCs and expanding their availability was introduced in late 2021 and further expanded in 2022 by means of the IRA. Under the provisions of the IRA, PTCs and ITCs would both be extended for projects placed in service during or after 2022. The IRA extends and modifies the ITC and PTC for certain energy projects that begin construction before January 1, 2025. However, in order to receive the full amount of the credit, certain wage and apprenticeship requirements must be met. The IRA also provides a new ITC and PTC for projects generating electricity that are placed in service after December 31, 2024, and have a greenhouse gas emission rate of zero or less.  In addition, the IRA provides for specified “bonus” credits if certain “domestic content” requirements are met or the project is in certain identified “low-income” or “energy communities.”
• Loan Guarantees: As fully described in the answer to Question 7 above, the DOE has a guarantee program for different types of clean energy and energy transition projects that fall into the Innovative Clean Energy category. Those include renewable energy projects, hydrogen projects, carbon capture projects, efficient electrical projects, energy storage projects, and others that comply with the following requirements: (i) utilize a new or significantly improved technology; (ii) avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases; (iii) are located in the United States; and (iv) have a reasonable prospect of repayment. In addition, the Department of Agriculture loan guarantee program is available for the development of biofuels, renewable chemicals, and bio-based products.
• Research and development: federal agencies, including the OCED, issue grants and other support for research efforts focused on renewable technologies and applications. As further detailed in other answers, recent legislation increased available funding for R&D, including thorough the creation of the new OCED.

There are no disincentives to renewable energy at the federal level.

While there is generally no government assistance for energy costs, the federal government continues to operate the Low Income Home Energy Assistance Program (LIHEAP) which provides some targeted assistance for low-income households for energy related costs.  In October 2023, $3.7 billion in new LIHEAP funding was released.  On a longer time horizon, there are a number of provisions in the IRA that are intended to reduce energy prices for consumers. Those provisions include funding for clean energy, energy efficiency upgrades that reduce demand, and additional tax benefits for projects located in low-income communities. The IRA also provides funding to expedite environmental permitting in order to bring energy projects online faster.

There has not been any significant discussion about de-linking gas and renewables prices.

Recently, large technology companies which are investing in artificial intelligence have entered into record-setting renewable energy purchase agreements.  Developing AI requires the operation of large data centers, and many of the companies investing in AI have existing renewable energy commitments.  Accordingly, as investment in AI continues, it will likely increase the demand for corporate renewable purchases.

Additionally, incentives set forth in the IRA and other new legislation has boosted the economic attractiveness of renewables in the United States across investment portfolios of various organizations and businesses. Under the IRA, tax credit transferability is intended to encourage investments in the clean energy space and provide a broader range of taxpayers with access to tax benefits associated with clean energy projects. Prior to the IRA, tax equity transactions (i.e., transactions to monetize tax credits) required extensive legal structuring in order to include the participation of a tax equity investor (i.e., an investor whose principal investment focus is on acquiring and utilizing the tax credits) in a project.  The IRA contains a transferability provision pursuant to which a taxpayer can make a one-time election to transfer all (or any portion specified in the election) of an eligible credit to an unrelated taxpayer or multiple unrelated taxpayers.  Treasury and the IRS recently released final guidance on tax credit transferability.  Among other requirements, the transfer must be for cash and the transferor must register the tax credits sold.  The proceeds from the transfer are reportable as tax-exempt income for the seller are not deductible by the buyer.

Eligible credits include:

• production tax credits for capturing carbon emissions, generating renewable or nuclear electricity, and producing clean hydrogen and clean transportation;
• tax credits for building new factories and re-equipping existing assembly lines to make or recycle products for the green economy and reduce greenhouse gas emissions at existing factories by at least 20%;
• tax credits for manufacturing wind, solar, and storage components or processing, refining or recycling critical minerals; and
• tax credits for installing electric vehicle and other clean fuel charging stations in low-income and rural areas.

Prior to the IRA, tax credits for renewable energy required periodic renewal/extension and resetting of the size of the credits by Congress on an almost annual basis, which created uncertainty for developers and investors. Having tax credits established for longer periods under the IRA provides more predictability and clarity, allowing asset managers and other stakeholders to plan further in advance.

Lack of transmission remains a significant barrier to the development of renewable energy. In the last year, the total capacity of projects in interconnection queues grew ~27%. There are now more than 1,570 GW of generation and 1,030 GW of storage waiting to connect to the grid. One analysis found that solar, wind, and battery projects constitute more than 95 percent of the capacity in interconnection queues.  The passage of the IRA has continued to drive increases in the interconnection queue.

Recently, the DOE released a draft of the National Transmission Needs Study (“Needs Study”) which estimates that the United States will need a 57% increase in transmission by 2035 to support new clean energy generation. The Needs Study found that increasing interregional transmission would be the most effective means of alleviating transmission constraints and bringing renewable generators online. Resolving interconnection issues would also be helpful. Recently, FERC has issue a rulemaking updating its generator interconnection procedures.  Additionally, FERC is expected to release a separate rulemaking on transmission planning later this year.

In addition to long interconnection queues, the installation of offshore wind projects requires a specialized workforce and the availability of specialized vessels. It is estimated that a $6 billion dollar investment is needed in ports, and specialized vessels to ensure installation of 30 GW of offshore wind by 2030.

• Construction Contracts (e.g., EPC (engineering, procurement and construction) and BOP (balance-of-plant) contracts).
• Interconnection and Transmission Contracts and Energy Management/Scheduling Services Agreements.
• Investment Documentation (e.g., tax equity investment agreements, including equity contribution agreements and LLC agreements: joint venture agreements; parents’ guaranties and other credit support agreements).
• Off-take Agreements (e.g., power purchase agreements, power hedges, and sale agreements for Renewable Energy Certificates (“RECs”), carbon offsets and similar environmental attribute instruments).
• Project finance agreements (e.g., loan agreements or other guarantee agreements).
• Leases, easements and other site-control instruments.
• Asset Management, Operation and Maintenance and other operating-stage services agreements.

The $1.2 trillion IIJA includes major domestic procurement requirements for infrastructure materials. The law permits federal funding for infrastructure only if the iron and steel, manufactured products, and construction materials used in the project are produced in the United States, though there are several exceptions. One exception is when the inclusion of domestic products would increase the overall cost of the project by more than 25%.

Further, President Biden authorized the use of the Defense Production Act (“DPA”) to accelerate domestic production of clean energy technologies. Specifically, the President authorized the DOE to use the DPA to rapidly expand American manufacturing of five critical clean energy technologies:

• solar panel parts like photovoltaic modules and modules components;
• building insulation;
• heat pumps, which heat and cool buildings more efficiently;
• equipment for making and using clean electricity-generated fuels (such as green hydrogen), including electrolysers, fuel cells, and related platinum group metals; and
• critical power grid infrastructure like transformers.

Lastly, the IRA requires that projects be built with certain percentages of domestic content in order for a project to qualify for the maximum available tax credits.  For example, a project must use 100% domestic steel and iron for structural construction materials.  For additional discussion please see the response to Question 11.

On June 6, 2022, the Biden administration instituted a two-year hiatus on the countervailing, antidumping or other duties being imposed on solar cell and module imports from Cambodia, Malaysia, and Vietnam imposed by the U.S. International Trade Commission. The declaration temporarily ended contentious trade disputes brought to protect domestic producers from alleged unfair trade practices.  However, the hiatus is set to expire June 6, 2024, and will not be extended.  Panels imported before June 6, 2024 will not be subject to tariffs provided they are installed prior to December 31, 2024.  However, beginning June 7, these products will once again be subject to tariffs.  Given the grace period, there are likely to be minimal short-term impacts to the deployment of renewables, but industry groups have come out against any additional tariffs.

Similarly, solar inverters face supply chain issues. As a result, manufacturers may seek to take advantage of manufacturing tax credits under the IRA and increase domestic production. Under the IRA, inverters manufactured in the United States will be eligible for a $0.11/watt of capacity PTC. Recently, inverter manufacturers have announced increases in U.S. manufacturing in response to increased demand and the availability of credits under the IRA.

Additionally, recent analysis suggest that higher interest rates, as have been experienced in recent years, have a greater impact on the cost of developing renewable energy projects.  This is in part by narrowing the gap in borrowing costs between renewables, which until recently realized lower borrowing costs, and traditional projects which possessed higher borrowing costs.  Increased borrowing costs have not had an impact on renewable development so far, but the impact of higher rates may be realized in the long term.

There are a variety of large capacity projects under development, including the offshore wind projects discussed in Question 19.

Additionally, there is increasing movement towards operationalizing newer technology. The IIJA also authorized the creation of regional hydrogen hubs. Last year seven hubs were announced, which will operate as regional networks for pursuing various clean hydrogen goals.  For example, there are significant projects under development that will produce and store green hydrogen.  The hope is to produce 10 million tons of clean hydrogen by 2030.  Additionally, because of the hydrogen incentives in the IRA, more projects are expected to be announced focusing on industrial and transportation applications of clean hydrogen. Recently, the largest direct air capture project was announced outside of Midland, Texas. Expected to go live in mid-2025, the project is expected to remove 500,000 tons of carbon from the air each year.

Broadly, the deployment of battery storage capacity is expected to increase significantly in 2024.  Total planned and operational utility-scale battery storage in the U.S. totalled roughly 16 GW at the end of 2023, and an additional 15 GW is planned for 2024.  That near-doubling of deployed battery capacity is driven largely by projects in Texas (6.4 GW) and California (5.2 GW).  Recently, battery discharge in Texas (ERCOT) reached an all-time high, when batteries served 5.1% of load in the state.  This growth is likely driven, in part, by a change in the IRA that made standalone battery energy storage system (“BESS”) projects eligible for the full investment tax credit.  This is a trend we would expect to continue as battery storage projects are built and capacity increases.

A number of advanced nuclear projects have also been announced and the NRC has announced a proposed rule establishing a new permitting framework, which could simplify the process for certifying new advanced nuclear projects.

The United States is positioned to become a leader in developing energy technologies.  Increased demand for clean power, the IRA, and state policies will create incentives to pursue newer technologies. There are currently two operating offshore wind projects, with a pipeline of projects scheduled to come online. The South Fork Wind facility recently completed construction and began delivering power to New York. Vineyard Wind, another Atlantic coast project, also recently began delivering power from turbines installed as part of phase 1 of construction. The pipeline will continue to grow, as states have a total offshore wind target of 81,000 MWs.  The Bureau of Ocean Energy Management recently accepted comments on additional offshore wind areas in Maine and New Jersey.  Currently, almost all of the projects under development are off the East Coast of the United States. However, there is also an opportunity to develop offshore wind projects in the Gulf of Mexico, the Great Lakes, and the Pacific Ocean.  Although the offshore wind industry experienced recent challenges in the United States because of supply chain constraints and higher capital costs, it is poised to rebound from those challenges.

Hydrogen has become another area of increasing attention and focus for the public and private sectors in the United States. The Biden administration’s “Hydrogen Shot” project was launched with the goal of reducing the cost of producing clean hydrogen to $1 per 1 kilogram by 2031. Part of the initiative will focus on developing seven regional hydrogen networks which would co-locate hydrogen producers and consumers in an effort to jumpstart local hydrogen economies. With the IRA providing significant resources for “clean” hydrogen development, the United States should continue to see projects develop throughout the hydrogen supply chain, especially in manufacturing electrolysers, which can be exported.

There is also an opportunity to deploy advanced nuclear reactors. As discussed in Question 18, the NRC is revising permitting rules which would allow new technologies like small modular reactors to come online and demonstrate their operational capabilities.

Renewable energy projects in the United States are commonly financed through project finance schemes, including a mix of debt and equity. The most common structure is bank debt financing during construction with tax equity financing providing the long-term financing solution for the project once construction has been completed. Financing sources vary depending on the specific stage of the project cycle: development, construction, or operation. During the development phase, which represents the most speculative phase in which funds invested are at risk of total loss, projects are mostly financed through equity. Most of the equity comes from the developer or other equity investors expecting a high return. This phase ends when the project is ready to build (“RTB”). During the construction phase, the project is financed with debt to be refinanced by tax equity prior to the commercial operation date (“COD”). Interest rates are lower than in the development phase but still higher than in the refinance phase due to the risk that the project may not reach its COD. During the operation phase, the re-finance or permanent financing takes place. Bank debt is typically replaced by tax equity although the developer may procure bank debt at a corporate level above the operating level as “back-leverage.” The impact of interest rate increases over the past year on the cost of capital and financing of renewable energy projects is yet to be determined.

Under a project finance structure, the project developer creates a project company that holds all of the project’s interests, rights, and assets. The equity interest in the project company will usually be held by a limited liability company created for pledging the equity to the lenders in the project financing.

DOE grants and loan programs are also a financing option for those projects viewed as having difficulty accessing capital. As mentioned in previous answers, new funding for DOE LPO programs and grants was authorized by the IIJA and the IRA.