Looking to make the transition from an economy based on fossil fuels, renewable energy businesses across the value and supply chain have benefited from state and federal government subsidies, support and incentives.
State renewable power/portfolio standards (RPS), which have been enacted in 37 states to date, have been critical to the near-doubling of U.S. renewable energy capacity since 2008, along with the creation of hundreds of thousands of jobs.
While the Obama administration has set U.S. energy policy firmly on the renewable path, the federal government — more precisely, a bitterly divided Congress — has relied primarily on tax incentives in the form of investment and production tax credits (ITCs and PTCs) to foster growth and development of the U.S. clean-energy economy.
However, key federal ITC and PTC subsidies, such as the Treasury 1603 grant program and wind energy PTC, have either expired or are due to expire shortly, threatening to starve the broad spectrum of renewable-energy industry participants of capital at a time when weak macroeconomic conditions and market microeconomics threaten to stall further growth and development.
In a move that would significantly broaden and deepen the pool of private-sector capital available for investment in solar, wind, geothermal and other forms of renewable energy businesses and projects, Sen. Christopher Coons (D-Del.), along with Senator Jerry Moran (R-Kan.), on June 7 introduced a bill in the Senate that would allow renewable-energy companies to form master limited partnerships, or MLPs.
Fossil fuel industry businesses — predominantly oil & gas pipeline operators and distributors such as Kinder Morgan Energy Partners LP (NYSE:KMP) and Enterprise Products Partners (NYSE:EPD) — have taken advantage of these subsidized, tax-advantaged investment vehicles for decades.
MLPs have become especially popular with investors searching for relative security, stability and high dividend yields in recent years. The following chart shows the five-year performance of the JPMorgan Alerian MLP Index ETN (NYSE:AMJ), an exchange-traded note that tracks a broad group of U.S. exchange-listed MLPs.
Leveling the U.S. Energy Investment Playing Field
It’s clear that the oil & gas industry and investors alike have benefited from MLPs. The thing is, the legislation that opened the door for them to do so specifically excludes renewable-energy companies from doing so. The Master Limited Partnerships Parity Act seeks to level the U.S. energy investment landscape by addressing and correcting that.
“Master limited partnerships have been largely responsible for the tremendous growth in our country’s energy infrastructure,” Senator Moran stated upon the bill’s introduction. “In order to grow our economy and increase our energy security, sound economic tools like the MLP should be expanded to include additional domestic energy sources.”
In addition to gaining the Obama administration’s support, the Coons-Moran MLP Parity Act has gained the support of five Republican co-sponsors.