Power & Pipes

In our final dispatch from the CERAWeek conference by S&P Global, Felipe Alice shared some insights and key takeaways from a luncheon and dialogue session featuring tech entrepreneur, investor, and philanthropist Bill Gates.

US Customs and Border Protection (CBP) has begun issuing questionnaires to solar companies requesting extensive disclosures about the source of modules, panels, and other products. This marks an expansion of the scrutiny on the supply chain for the solar industry, as importers previously only had to provide such information if shipments were detained for inspection.

In 2022, FERC began issuing directives aimed at ensuring that the reliability of the bulk-power system is protected from potential risks posed by the growing number of inverter-based resources (IBRs) connected to the electric grid. As we previously reported, FERC issued three orders in December 2022 focused on increasing regulations for IBRs through the North American Electric Reliability Corporation (NERC), an independent electric reliability organization that develops and enforces mandatory reliability standards. In continuance of this goal, this fall, FERC took the step of directing NERC to develop or modify reliability standards specifically to address reliability concerns attributable to IBRs (Order No. 901).

The solar power industry seems to be caught in the crosshairs of competing legislative agendas. The US Inflation Reduction Act (IRA) created incentives to increase solar capacity via tax credits. The Uyghur Forced Labor Prevention Act (UFLPA) creates a rebuttable presumption that any goods that were mined, produced, or manufactured, wholly or in part, in the Xinjiang Uyghur Autonomous Region (XUAR) were made with forced labor, and bars their importation into the United States. More than 90% of the world's ingots and wafers (made from polysilicon) are produced in China, and 80% of solar panels going into both residential and commercial projects in the United States come from abroad. The push for more solar capacity is potentially hindered by supply chain–based trade restrictions, resulting in competing agendas.

While no one has a crystal ball for what 2023 will hold for the energy industry, the seemingly widespread support for green technology and clean energy is expected to carry through this year. In our industry outlook, “The Trends—and Traps—That Will Shape 2023,” we highlight some of the major green energy tax credit trends.

On January 1, 2023, newly constructed standalone energy storage facilities became eligible for an investment tax credit (ITC) under Section 48 of the Internal Code of 1986, as amended (Code), pursuant to provisions of the recently enacted Inflation Reduction Act (IRA). Storage facilities placed in service before 2023 generally were only eligible for an ITC when constructed as part of a combined renewable generation (typically solar) plus storage facility and the storage system was charged by the paired renewable generation system at least for the 5-year initial operating period. Storage developers and owners will now be able to take advantage of new and significant tax credit opportunities, whether or not the storage system is paired with a renewable generation energy facility.

FERC issued three orders focused on increasing regulations for inverter-based resources (IBRs) in fulfillment of one of its primary goals to protect the reliability of the bulk-power system. FERC ensures this reliability through the North American Electric Reliability Corporation (NERC), an independent Electric Reliability Organization that develops and enforces mandatory reliability standards. The reliability standards are only mandatory for certain entities registered with NERC, but most IBRs are not required to register and therefore are not obligated to follow the reliability standards.

The US Department of Commerce (DOC) issued its preliminary determination on December 2, 2022, related to circumvention of antidumping and countervailing duty (AD/CVD) orders A-570-979 and C-570-980 (the Orders) with respect to Cambodia, Malaysia, Thailand, and Vietnam. DOC determined that imports of certain crystalline silicon photovoltaic (CSPV) cells exported from Cambodia, Malaysia, Thailand, or Vietnam using parts and components produced in China are circumventing the AD/CVD orders on solar cells and modules from China.

Midcontinent Independent System Operator (MISO) has issued a report analyzing the effects of renewable energy growth in the MISO region and concluding that the system can reliably accommodate a significant percentage of variable renewable resources.

Our colleagues in the tax practice have published a LawFlash detailing the Consolidated Appropriations Act, 2021, which includes the Taxpayer Certainty and Disaster Tax Relief Act of 2020. The act contains tax provisions to provide direct relief to individuals, but also includes tax benefits for various industries, including the “green” energy and technology industries.