An MLP is a publicly-traded limited partnership in which regular investors can purchase shares in the partnership (called MLP units) just like stock shares. These investments have long been utilized by the oil and gas industry, but renewable projects have been excluded by federal tax law from using them.
The SMU team shows that $5 billion to $6 billion is currently sidelined by arbitrary restrictions in the tax code, and also details other strengths of an MLP-based policy:
• MLPs are a critical piece of the oil & gas investment toolkit and currently are unavailable to renewables.
• Access to capital markets will demonstrate the market strength of projects that are attractive to MLP investors.
• MLPs are a strong fit for renewable investments because of renewables’ long-term contracts (Power Purchase Agreements or PPAs) that support cash flow stability
• The proven track record of MLPs in raising capital for energy infrastructure can be applied to renewable energy
• A chance for Main Street investors to invest in renewable energy projects, to offer a choice compared to the fossil energy projects that are available in MLPs today
This study was released today at WINDPOWER 2012 Conference & Exhibition in Atlanta, GA—the world’s largest annual wind energy event.
"MLPs show promise as another tool to drive renewable energy investment if structured properly to match renewable tax incentives," said AWEA Senior Vice President for Public Policy Rob Gramlich. "This policy could be an interesting addition to a national energy strategy, and should be a part of the renewable energy landscape."
Paul Holshouser, Finance Policy Manager, www.awea.org/blog