Title: The Capacity Crunch, Part Three
Speakers: Josh Combs and Charlie Suessmith
Josh Combs (00:08):
Charlie, great to see you today. Look forward to chatting today about the Inflation Reduction Act and the impacts that it’s had at the state level.
Charlie Suessmith (00:15):
Thanks, Josh. Yeah, looking forward to it. Always a pleasure. Let’s talk IRA and utilities. So Josh, beyond just the increased tax credit levels that we’ve seen in the IRA, are there other components of the IRA that you think will potentially benefit utilities such to change their planning processes? I’m thinking in particular the tax credit transferability market that’s been created. It seems like this has just created a whole new pool of investors to invest in renewable energy, making these projects likely more feasible. So do you think that utilities will take this into account or have they already taken this into account for their planning purposes?
Josh Combs (00:56):
Yeah, yes. I think that this is another example where previously this is a carrot or funding an option for utilities that was just not there before. And we have seen our clients, in ongoing proceedings, whether it’s the commission asking or the clients directly, bringing forth their position on how they wanna take advantage of these provisions. And really what the tax transferability provisions in the marketplace is going to facilitate is it’s really gonna bring down the costs of bringing all of these renewable resources online, retiring legacy generation, meeting load growth, which is happening in the marketplace. Now, there’s an option for utilities to take advantage of, “Hey, let’s, rather than take advantage of these credits ourselves, let’s sell these credits.” And in some cases, they may get even more of an economic benefit for customers.
And so it’s really helping to make these renewable portfolios and kind of that it being a resource as a part of utility plans, viable and attractive. Whereas before, as we kind of have discussed, that cost would sometimes just be a kind of sticker shock for these commissions. So we look forward to seeing how it’s gonna play out. I know that some utilities have already determined that they are gonna take advantage of it and whether it’s through an auction process or some other mechanism, I think the primary goal is how can utilities take advantage of these transferability provisions and this marketplace to drive down the cost of bringing renewables online?
Charlie Suessmith (02:34):
And now with the new market, the tax transfer market, you also aren’t required to enter into these sometimes very complicated tax equity transactions. So it’ll be interesting to see how this plays out.
Josh Combs (02:48):
Absolutely. Which obviously there’s a cost and kind of human resources that are involved to navigate those transactions. And so that’s a part of the calculation, I think, in determining how to take advantage of it. And so that’s something that the IRA has allowed and facilitated and so it’d be interesting to see how it plays out. Charlie, I’ve enjoyed talking to you today and picking your brain about the IRA. I think that we’ve talked about some of the initial impacts and there’s still probably a lot more that we will see as these provisions play out and maybe we can come back again and I can pick your brain further on that.
Charlie Suessmith (03:24):
Yeah, it’s certainly still developing. It’s gonna be exciting to see how things play out. So, yeah. Absolutely. It’s been a pleasure.
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