Who benefits from renewable energy subsidies?

Texas is known for fiercely promoting its oil and gas industries, but it is also No. 2 Renewable Energy Producer In the country after California. In fact, more than a quarter of all wind power produced in the United States in 2021 was generated in Texas.

These projects benefit from an attractive state tax incentive program called Chapter 313, That incentive program expires on December 31, 2022, and the rush of applications for wind and solar power projects to secure incentives ahead of the deadline is providing a rare window into a notoriously opaque industry.

By reviewing applications and ownership documents, we were able to track who actually makes and owns a substantial portion of the country’s renewable energy, when and how those assets change hands, and who ultimately benefits from tax incentives. it happens.

The results may surprise you. Most utility-scale solar and wind power projects in Texas are not owned by companies focused on renewable energy—they are owned by energy companies or utilities better known for fossil fuels, including some that have aggressive opposition to renewable energy and climate policies at other state and national levels.

The policy implications of these findings are complex. While these subsidies may prompt some energy companies to reduce their greenhouse gas emissions, they can also allow energy companies to continue polluting existing fossil fuel assets while collecting subsidy benefits.

A subsidy program that saves companies billions

Chapter 313 limits how much companies have to pay in property taxes for schools if those companies build infrastructure and agree to create jobs. The Texas Legislature passed it in 2001 when several large companies, including Intel and Boeing, were considering Texas for investment.

Companies using this program can save billions of dollars in local property taxes. Although, investigation revealed High cost per job and minimum requirements for companies. the state’s school funding system Had to suffer too.

The program was not renewed, but companies that applied for the incentive by August 1, 2022 could grandfather in their investments for 10 years of tax benefits. because of which multitude of applicationsIncluding wind and solar projects.

Who is proposing renewable energy projects?

We have 191. reviewed Wind and Solar Project Applications Filed in 2022. If built, these projects would almost double Number of Renewable Energy Projects in Texas,

It is extremely difficult to track the owners of renewable energy projects in the US, as most are structured limited liability companies, or LLC. However, applying for Texas incentives requires not only information about the owner, but the signature of a personal representative of the owners. It provides a glimpse into the impact that subsidies can have and who benefits.

We found that just over a third of the 191 proposed projects—69—are owned by renewable energy companies, such as the Danish company rsted and Recurrent Energy, which is owned by Canadian Solar.

More than half of the proposals – 101 – were submitted by energy companies known more for oil and gas, or utilities with fossil fuel assets. This includes renewable energy subsidiaries of oil supermajors such as Total and BP, and utility owners including EDF, AES and Engie, all of which are major global players.

Some project applications came from investment groups such as DeShaw Group, Cardinal Investment Group and Horus Capital. Apex Clean Energy, the renewable energy subsidiary of principal investment manager Ares Management, appears frequently in applications.

new owners take

The proposed projects provide a snapshot of developers of renewable energy projects. But what happens after these projects are built?

To find out, we also looked at all renewable energy projects completed in 2020 and 2021 that participated in the Chapter 313 incentive program.

To our surprise, almost half of the projects built in 2020 or 2021 had changed hands by 2022. Some were due to takeover of the company. Several other projects were sold.

This changed the structure of the owners. While renewable energy companies owned about half of the projects in the application stage, by 2022, two-thirds of projects were owned by utilities and energy companies with fossil fuel assets.

Original developers may benefit from the first year or more of the tax break, but new owners are prepared to deduct the majority of the remaining years of the 10-year property tax incentive.

[Image: courtesy of the authors]

The most common pattern of sales was a renewable energy developer selling a project to an energy company or utility. For example, Duke Energy bought a solar project originally owned by Recurrent Energy, and Alpin Sun sold a solar project to BP.

We found that ownership by self-described “venture capitalists” and other investors was rare before 2022. The lucrative and ending incentive program can lead to a gold rush of applications, including some companies with limited experience in renewable energy.

When renewable incentives become subsidies to fossil fuel companies

Many of the owners who benefit from these subsidies are parent companies. high carbon emissions And a History of fighting climate policies,

For example, the company with the most renewable energy projects subsidized under Chapter 313 from 2020 to 2022 is NextEra. NextEra’s parent company is also Florida Power & Lighta utility that has campaigned Rooftop Solar in Florida And sued To stop hydropower imports into Massachusetts. However, in Texas, NextEra lobbied for Chapter 313 incentives to continue.

Other major energy companies on the owner list include Total Energy of France; BP; Duke Energy; and Savian, which is owned by Shell.

The data suggest some potential tensions within green energy policy.

Environmentalists have long argued for federal and state subsidies for renewable energy as a means to combat climate change, including: Climate- and inflation-focused bill is currently in Congress,

However, as our data analysis shows, owners who benefit from renewable energy incentives may in some cases be the same fossil fuel companies that actively oppose the green energy transition. 2021 study resultsThe earnings call, using data released by energy companies, also suggests that energy company investments in renewable energy projects are often just diversification strategies—they are not replacing fossil fuels.

Our analysis is based on a program in Texas, but with the size of the Texas renewable energy sector and the companies involved, it could provide insights for broader renewable energy policies.

The key to any subsidy program is clearly articulating goals and tracking success in meeting them. If the goal is to reduce greenhouse gas emissions, that means examining who is benefiting and determining whether subsidies are actually leading to a transition away from fossil fuels.

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