Jan. 2023 Policy Perch: IRS Guidance, Securitization & New Mexico's Program

Highlights

The latest news and announcements impacting community solar and the clean energy industry with key takeaways for your business.

United States

IRS issues wage and apprentice requirements under IRA

The gist: The Internal Revenue Service (IRS) issued guidance providing taxpayers information on how to satisfy the prevailing wage and apprenticeship requirements for enhanced tax benefits under the Inflation Reduction Act. Projects that do not meet the prevailing wage and apprenticeship requirements are only eligible to claim the 6% base ITC and not the full 30%. See the full guidance Notice 2022-61.

Workers employed by the developer, their contractors, or subcontractors must be paid the same prevailing wages that are paid on federal construction jobs. Additionally, qualified apprentices must be used for 10-15% of total labor hours.

These wage and apprenticeship requirements generally only apply to work on the project site but may apply to operation and maintenance agreements if such an agreement is an alteration or repair on a facility that claimed tax credits for 5 to 12 years after the project enters service.

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POV from our Perch: The issuance of this guidance from the IRS has a two-pronged effect for existing and burgeoning community solar markets. First, it buttresses the prevailing wage provisions already instituted in states such that if a project was uncommitted to the labor provisions, it would change a project’s economics significantly – effectively taking a 30% ITC bonus down to just 6% for this category.

This can be borne out in markets like California that are poised to include complementary rules after the IRA passed, or in Pennsylvania where labor groups have fought for prevailing wage commitments from installers–commitments that are now much more likely to be met.

Secondly, and perhaps more significantly, the prevailing wage and apprenticeship requirements to qualify a project for the full ITC increases the likelihood that labor groups will advocate for the creation of new community solar markets, and with those markets an attractive source of solar jobs.

What else to know:

This starts the clock for projects to begin construction by January 28, 2023, to be exempt from the new requirements in the ITC.
The IRS is retaining the same definition from 2019 to determine construction start date: either incurring 5% of the total project cost or starting “physical work of a significant nature.”

New York

DSD closes $155 million financing for first-of-its-kind ABS with community solar

The gist: DSD Renewables raised $155 million in the first instance of asset-backed securitization (ABS) with community solar. This is the first time such a securitization has happened for assets including community solar, signaling the maturation of this sector of the solar industry.

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POV from our Perch: DSD successfully closing this type of ABS financing is significant for community solar as an industry. Perch is proud that our community solar performance data provides valuable insights into risk assessments for this asset class, aiding project owners seeking securitization.

As financiers become more familiar with community solar and its real risks, this type of financing will likely expand and has the potential to catalyze greater growth than has been previously forecasted, especially when compounded by additional ITC values and the transferability of credits.

New Mexico

Friction between community solar advocates and utilities

The gist: Since the passage of SB84 in April 2022, utilities have been attempting to stall the launch of New Mexico’s community solar program with transparent legal delay tactics. Utilities – Southwest Public Service (SPS) in particular – have opted to play the mime in signaling their support for the program in step with lawmakers, regulators, nonprofits, and the general public.

Meanwhile, they have been undermining the process as often as possible in an attempt to weaken community solar to the detriment of the most economically vulnerable New Mexicans. In addition to filing its fourth appeal, SPS is attempting to charge community solar customers for transition costs thereby eroding the savings–and financial relief–the program is meant to provide.

The Public Regulation Commission has publicly taken a stance against these tactics and, while legal challenges remain, the program is pushing forward as planned.

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POV from our Perch: The PRC has acted swiftly and decisively to keep the program on track, and we are confident that reason will prevail against the unresolved challenges which, at their core, are meritless procedural hurdles as believed by most stakeholders. This program will help showcase why community solar is here to stay– not only in New Mexico, but nationwide. Though utilities have been obstinate, the programs’ success will hinge on the utilities’ adherence to the rules and their cooperation. A well-functioning program benefits all, utility companies included.

The utilities complaints about the program belie themselves: they cite customer protection concerns while using ratepayer funds to block a program which will help New Mexicans save money on high energy costs. This opposition is nothing new, certainly not for SPS’ parent company Xcel which has used past legal challenges to undermine other community solar programs in Minnesota and Colorado.

Regardless of the opposition, the community solar industry must coalesce and partner with each utility towards the ends of proper billing, crediting, and other bilateral processes necessary to manage projects.

Bill Tracker

State	Bill	What it Does	Status
NJ	S3305	Allows customers to self-attest LMI status	Referred to Senate Budget and Appropriations Committee
NJ	S3123/A4782	Increase Community Solar capacity from 150 MW to 500 MW annually	In Senate Environment and Solid Waste Committee
NJ	S2848/A4328	Allows Remote Net Metering	Passed out of Senate. In Assembly Environment and Solid Waste Committee
NY	ICSA 2.0	Incentive for LMI serving projects	Undergoing revisions with NYSERDA
VA	SB1266	Seeks to fix the minimum bill by capping it to 2x basic customer charge and increase program capacity by tying it to peak load (10%, 1.6GW from 150 MW)	Referred to Commerce and Labor Committee
VA	SB1083	Seeks to fix the minimum bill and expand program capacity to 315MW and make additional incentives available	Referred to Commerce and Labor Committee
VA	HB1853	Combines the goals of SB1266 and SB1083	Committee Referral Pending

Dates on our mind

Important dates to be aware of:

Federal:

February 17, 2023Additional IRA guidance on ITC bonus credits expected

New Mexico:

December 1, 2022Project solicitation window openedProgram guidebook is published
January 31, 2023, 4:00 PM MTProject solicitation window closed
April 1, 2023 Solicitation results announced

California:

Regulatory schedule for A22-05-22: Green Tariff Programs Review Proceeding, this is the proceeding that will carry out the requirements in AB2316

Event	Date
Proposals served as Opening Testimony - includes party evaluation of existing programs and proposals for revised and new programs	January 20, 2023
Workshop	Mid-February 2023
Revised Proposals served as Amended Opening Testimony	TBD
Reply Testimony on Proposals	March 17, 2023
Rebuttal Testimony on ProposalsMotion for Hearings, Oral Argument, or Request for Briefing Due	March 31, 2023
Proposed Decision	Q3 2023

Illinois:

Proposed Traditional Community Solar Application Review & Scoring*November 1, 2022 - Application Process OpenedApplication Review Period. Applications undergo initial review by Program Administrator – Approximately 4 weeksNovember 29, 2022Application Cure Period. Approved Vendors cure deficiencies identified by Program Administrator – Approximately 2 weeksDecember 13, 2022Application Scoring Period. Program Administrator begins scoring process for all relevant applications (those submitted without deficiencies and those that successfully cure deficiencies during the 2-week cure period) – Approximately 3 weeksJanuary 3, 2023Scoring Cure Period. Approved Vendors are offered a chance to review initial score and dispute and resolve any discrepancies – Approximately 2 weeksJanuary 17, 2023Final scores will be posted publicly after the scoring cure period closes.January 20, 2023Multi-year integrated grid plan reports due: 22-0486, 22-0487*As of 1/9/23, the Application Review Period has not been completed

Maine: