INTERNATIONAL FIRMS SUSGEN, BNRG RENEWABLES PLANNING DEEPER US FOCUS THANKS TO BIDEN BOUNCE

Thanks to unique financing structures like tax equity and the vast policy and regulatory differences across its 50 states, renewable project finance and development in the U.S. is more complex than what is typically found in the more homogenous European markets. This can make it difficult for companies based abroad to break into the rich vein of opportunity the growing scale of the U.S. market provides.

However, an increasing number of European firms are making the leap across the pond and finding success. Since 2016, one of them has been BNRG Renewables, an Irish solar developer which broke into the market in states like Maine and Oregon during the twilight of the Obama era. Following the abrupt change in US leadership after the 2016 election, BNRG Director David Maguire said the firm immediately met with challenges.

“If I’d known that you guys were going to elect Trump, I think it might have shaped how we would’ve entered the U.S. market,” Maguire said with a laugh during a recent panel discussion.

But an even greater challenge for Maguire and BNRG Renewables was the complexity of the U.S.’s unique tax equity financing structure.

“The complexity of tax equity structuring was probably our steepest and most challenging learning curve,” Maguire said. “If I’d known how challenging that would’ve been, I’d probably have resourced up slightly earlier in terms of folks we brought on board. Getting through our first tax equity deal was like pulling teeth. But once you’ve done it, it becomes much easier.”

Simon James, the Chief Development Officer for London based Susgen, which also entered the U.S. market in 2016, was equally struck by the complexity, not only in terms of tax equity but also in the discrepancies between state policies.

“Every single state is basically a different country in terms of regulation, power and control, so you need to look at each one completely separately,” James said. “That’s one thing we didn’t take into account during our months of research. The key to that is having a strong local team.”

Susgen and BNRG wouldn’t go through the effort of breaking into the U.S. renewable project market if they didn’t see opportunity. For Maguire, the key aspect of the U.S. market is its scale.

“When you look at the U.S., you look at the scale of the opportunity,” Maguire said. “The U.S. solar market is less mature than in the E.U., so there is greater room for growth. And now with the ‘Biden bounce’ I think there’s a lot more interest in investing in the U.S. that we haven’t seen under Trump.”

James is also optimistic about the prospects for change the Biden administration may create, particularly with regards to states that have been historically unattractive to breach.

“If Biden rejoins the Paris Accord and renewable targets start to ripple down into all the states, there’s still a lot of bandwidth there, particularly in these Southern states where they are retiring coal plants,” James said.

Maguire is particularly hopeful that the Biden Administration will remove some of the barriers that are driving up costs in the U.S. compared to what is common back in the E.U. A particularly egregious example according to Maguire is the Trump Administration tariffs on components used in solar projects.

“I hope the new administration takes a look at these more recent tariffs,” Maguire said. “That would open up new markets in the U.S. The LCOE for solar development is the cheapest it’s ever been, yet in the U.S. it costs me almost a dollar per watt to build a solar project when it’s half that in the U.K.”

Another barrier for Maguire and his team in the U.S. is the tax equity structure itself, which Maguire argues drives up end transaction costs and overcomplicates transactions that should be much simpler.

“In our experience, the U.S. has higher transaction costs than anywhere else we’ve done business,” Maguire said. “Some transactions are needlessly overcomplex and because of that complexity, you have to make each transaction at significant scale. Otherwise, it just isn’t worth it. But if we can get the LCOE down and remove those trade barriers, the U.S. wouldn’t need tax equity.”

If the U.S. financing structure evolves as Maguire projects that it will under the Biden Administration, he says that European players like BNRG and Susgen will join US based firms as key drivers fueling market growth based on their years of experience and their ability to keep transaction costs low.

“We’re used to working in a single-digit margin environment,” Maguire said. “We've become very effective at deploying solar cheaply, but also quickly. We also offer efficiency with financing. A lot of the European banks have data points that go back a decade, so the vanilla project finance structure tends to be lower cost compared to what it would be in the U.S. investors know what to look for because they've been through it.”