New tools to finance renewable energy projects may get through Congress next year, according to Dem. Senator Chris Coons. In addition to growing Republican support for some form of carbon pricing, Coons believes there is sufficient support for renewable energy financing improvements.
Right now, investors in oil, gas and coal projects can form Master Limited Partnerships. There are many legislators on both sides of the aisle who support extending MLPs to the renewable energy sector. This is not the kind of structure attractive to early-phase startups but it is a useful mechanism for larger or mid-mature projects such as a large distributed biomass business or offshore wind energy.
MLPs have the benefits of a share-issuing corporation, but they pay no corporate taxes. Instead, all profits are paid out to investors as quarterly dividends, and the investors are taxed on their income. The catch in the current law that enables MLPs is that 90% of a qualifying company’s income must be derived from activities related to the production, processing or transportation of natural resources like oil, natural gas and coal. Businesses that transport and/or store ethanol, biodiesel and other altnerative fuels can qualify for MLP status, as can timber businesses. This information about MLPs is from Investing Daily (free subscription required) and from the National Association of Publicly Traded Parnterships.