For many years, renewable-energy facilities (such as wind and solar) have dominated “new builds” in the electric industry, far outstripping every other resource (such as natural gas) in terms of new capacity constructed. As concerns about new carbon emission regulations force utilities to take coal-fired plants offline, the long-term future of nonemitting renewable resources seems secure. This is true even as the renewable industry struggles with an on-again, off-again federal policy regarding the tax credits upon which these projects depend to achieve price parity with other resources.
Renewable-energy projects historically have been financed through tax-equity transactions that monetize these tax credits. Recently, however, renewable developers have begun experimenting with alternative forms of raising capital through the use of “yieldcos.” Although not solving all financing challenges for renewable developers, yieldcos nevertheless are poised to become a meaningful tool.
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