Photo of Benjamin Huffman

Ben Huffman is a partner in the Energy, Infrastructure and Project Finance Team and the Real Estate, Land Use and Environmental Practice Group in the firm's Chicago office.

Members of the Sheppard Mullin Energy, Infrastructure and Project Finance Team wrote an article published in the March 16, 2020 edition of Tax Notes Federal regarding the practical impacts on tax equity financing for renewable energy projects of a private letter ruling (“PLR”) published by the IRS in late 2019.  The PLR addressed normalization and loss disallowance rules applicable to public utilities.  These rules have posed significant challenges to public utilities that want to own renewable energy generation facilities, make efficient use of the tax benefits they provide (via the tax equity market) and recover their costs from ratepayers.
Continue Reading Walking the Path of Utilities’ Ownership of Wind and Solar

On February 19, 2020, the IRS published two guidance documents (links here and here) of significant legal and commercial importance to the nascent market for carbon capture and sequestration production tax credits set forth in Section 45Q of the Internal Revenue Code. Although there are certain differences, the guidance bears striking similarity to existing guidance relied upon by participants in the existing wind production tax credit (Wind PTC) tax equity market. Because of the highly developed state of the Wind PTC market, the similarities make it likely that existing Wind PTC deal structures could be adapted for the 45Q tax credits, thereby improving market adoption and transactional efficiencies. On the other hand, technical and economic differences exist between wind generation and carbon sequestration that need to be overcome in order for a robust 45Q tax credit market to develop. While we are continuing to review and consider this new guidance, we have some preliminary observations as to its practical implications on potential 45Q tax credit transactions.
Continue Reading New IRS Guidance on Section 45Q Carbon Capture and Sequestration Tax Credits: Key Preliminary Takeaways for Potential Market Participants

Securing interconnection and transmission rights and completing related upgrades is often the longest lead-time item in an electric generator’s development timeline. At the same time, many potential new power plants are being developed and vying for access to the electric transmission grid. The policy of most grid operators is to address interconnection requests on a “first come first served” basis. As a result, developers/interconnection customers are incentivized to submit their interconnection requests as early in the development process as possible in order to save their projects’ place in line. Over the last two years, Midcontinent Independent System Operator, Inc. (“MISO”) experienced record-high interconnection requests, and yet nearly 80% of these submissions ultimately were withdrawn prior to commercial operation of the project. MISO attributed this trend to developers submitting multiple requests for the same proposed project to test (and quickly withdraw) multiple interconnection concepts, many of which the developers knew they were not going to support through the entire queue process.

In an effort to reduce the number of requests in its interconnection queue that will ultimately be withdrawn, MISO requested that the Federal Energy Regulatory Commission (“FERC”) approve revisions to MISO’s interconnection request procedures related to milestone payments and site control requirements, which revisions would place substantially higher hurdles to a potential new power plant joining MISO’s generator interconnection queue. In Midcontinent Independent System Operator, Inc., 166 F.E.R.C. ¶ 61,187 (2019), FERC rejected MISO’s request, but FERC’s ruling leaves open the possibility that it might approve a similar set of heightened requirements, so long as MISO makes modifications to its proposal to account for interconnection customers that might be disproportionately disadvantaged.
Continue Reading FERC Rejects MISO’s Proposed Restrictions on Joining the Development Queue