Renewable Energy & Clean Fuels

As discussed previously in this blog, physical attacks against substations have been on the rise. However, the U.S. power grid[1] is also vulnerable to cyberattacks from U.S. adversaries, which includes hostile foreign governments, as well as individual bad actors such as insiders and criminals. Although there have been more physical attacks than cyberattacks

Last month, we reported how a key component of project finance—syndicated term loans—was the subject of a crucial case being heard in the U.S. Court of Appeals for the Second Circuit. In Kirschner v. JP Morgan Chase, the plaintiff contended that the term loans at issue were in fact securities that should be regulated

The global transition to clean energy is accelerating.  Belatedly, attention is starting to move to mineral sourcing, particularly whether the necessary critical minerals will be available in the United States.  A recent Aspen Institute report observed: “As the world transitions to a new energy mix, it will require clean energy technologies that are extremely mineral intensive. Demand for minerals is projected to rise at unprecedented rates and could generate supply shortfalls that will slow, or potentially even derail, global efforts to reach net-zero targets.”[1]

The Michigan Senate recently introduced legislation in an attempt to join several North American jurisdictions that have established clean fuel standards. The Michigan Clean Fuel Standard aims to reduce the average carbon intensity of transportation fuels sold and used in Michigan and incentivize investment in the production, distribution, and use of clean alternative fuels. Several

The Inflation Reduction Act (the “IRA”) provides funding for several tax credit incentives related to significant investments in energy projects.  One of these credits is the section 48C investment tax credit (“48C Credit”), which was originally offered through the American Recovery and Reinvestment Act of 2009.  The IRA includes a $10 billion allocation to the 48C Credit and also broadens the scope of eligible property a company can invest in to be eligible for the credit.  If selected, the 48C Credit provides a credit equal to 30% of the project’s capital investment that is deemed to be “eligible energy property.”

Syndicated term loans can be a significant piece of the capital stack when financing renewable energy projects; however, a crucial pending case in the U.S. Court of Appeals for the Second Circuit could complicate the use of these types of loans going forward. The case—Kirschner v. JP Morgan Chase—will seek to answer the central question at play: are syndicated term loans subject to federal and state securities laws?  The eventual ruling in this case could potentially impact any borrower or lender issuing or holding a term loan in a syndicated facility.

ESG and Renewable Energy

As corporations experience increased pressure from shareholders, consumers, employees, and the federal government to adopt Environmental, Social, and Governance (“ESG”) goals, many are procuring renewable energy as one way of meeting environmental targets. In 2022, more than 96% of S&P 500 companies published an ESG or other formal sustainability report.[1] In addition to voluntary goals and initiatives, the Securities and Exchange Commission is in the process of finalizing enhanced and standardized climate and ESG disclosure requirements for publicly traded corporations. As a result, corporate renewable energy power procurement is expected to account for nearly 40% of the projected utility-scale wind and solar project growth through 2023 and 2024 in the United States.[2]

As nations continue developing renewable energy infrastructure to meet sustainability targets, some are creating unique approaches to ensure they meet their stated goals. In what is expected to be a first for any nation (developed or otherwise), the Energy Ministry of Israel is enacting new country-wide regulations requiring all new non-residential buildings to have rooftop solar panels.