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August 4, 2022
Who benefits from renewable energy subsidies?
In Texas, it's often fossil fuel companies that are fighting clean energy
elsewhere
Nathan
Jensen, Professor of Government, The University of Texas at Austin
College of Liberal Arts and Isabella Steinhauer, Master of Public
Affairs Candidate and Graduate Research Assistant, The University of
Texas at Austin College of Liberal Arts
Texas is the No. 1 wind power
producer in the U.S.
Greg Smith/Corbis SABA via Getty Images
Texas is known for fiercely promoting its
oil and gas industries, but it’s also the
No. 2 renewable energy producer in the country after California.
In fact, more than a quarter of all the wind power produced in the
United States in 2021 was generated in Texas.
These projects benefit from a lucrative
state tax incentive program called
Chapter 313. That incentive program expires on Dec. 31, 2022, and
the rush of applications for wind and solar energy projects to secure
incentives before the deadline is providing a rare window into a
notoriously opaque industry.
By reviewing the applications and
ownership documents, we were able to track who actually builds and
owns a large portion of the nation’s renewable energy, when and how
those assets change hands, and who ultimately benefits from the tax
incentives.
The results might surprise you. The
majority of utility-scale solar and wind energy projects in Texas
aren’t owned by companies focused on renewable energy – they’re owned
by energy companies or utilities that are better known for fossil
fuels, including some that have
aggressively opposed renewable energy and climate policies in
other states and nationally.
The policy implications of these findings
are complex. While these subsidies might lead some energy companies to
reduce their greenhouse gas emissions, they also can allow energy
companies to continue polluting from existing fossil fuel assets while
collecting the subsidy benefits.
A subsidy program that saves
companies billions
Chapter 313 limits how much companies
have to pay in property taxes for schools if those companies build
infrastructure and agree to create jobs. The Texas Legislature passed
it in 2001 when a number of large companies, including Intel and
Boeing, were considering Texas for an investment location.
Companies using this program can
save billions of dollars in local property taxes. However,
investigations have revealed high costs per job and minimal
requirements for companies. The
state’s school funding system also suffered.
The program wasn’t renewed, but companies
that applied for the incentive by Aug. 1, 2022, could grandfather in
their investments for 10 years of tax benefits. That led to the
rush of applications, including for wind and solar projects.
Who’s proposing renewable
energy projects?
We reviewed 191
wind and solar project applications filed in 2022. If built, these
projects would almost double
the number of renewable energy projects in Texas.
It is notoriously difficult to track the
owners of renewable energy projects in the U.S., because most are
structured as
limited liability companies, or LLCs. However, the application for
Texas incentives requires not only information on the owner, but also
a signature of an individual representative of the owners. That
provides a glimpse into the impact that subsidies can have and who
benefits.
We found that just over a third – 69 out
of 191 proposed projects – are owned by renewable energy companies,
such as Danish company Ørsted and Recurrent Energy, owned by Canadian
Solar.
Over half the proposals – 101 – were
submitted by energy companies known more for oil and gas, or utilities
with fossil fuel assets. This includes the renewable energy
subsidiaries of oil supermajors such as Total and BP, and utility
owners including EDF, AES and Engie, all of which are major global
players.
Some project applications came from
investment groups such as DeShaw Group, Cardinal Investment Group and
Horus Capital. Apex Clean Energy, a renewable energy subsidiary of the
major investment manager Ares Management, frequently showed up in
applications.
New owners take over
The proposed projects provide a snapshot
of the renewable energy projects’ developers – but what happens after
these projects are built?
To figure that out, we also looked at all
renewable energy projects completed in 2020 and 2021 that participated
in the Chapter 313 incentive program.
To our surprise, almost half of the
projects built in 2020 or 2021 had changed hands by 2022. Some were
due to company acquisitions. Many other projects were sold.
This changed the composition of owners.
While renewable energy companies owned roughly half the projects at
the application stage, by 2022, two-thirds of the projects were owned
by utilities and energy companies with fossil fuel assets.
The original developers may have
benefited from the first year or so of the tax break, but the new
owners are poised to reap the majority of the remaining years of the
10-year property tax incentive.
The most common pattern of sales was a
renewable energy developer selling a project to an energy company or
utility. For example, Duke Energy purchased a solar project originally
owned by Recurrent Energy, and Alpin Sun sold a solar project to BP.
We found that ownership by self-described
“venture capitalists” and other investors was rare before 2022. The
lucrative and expiring incentive program likely led to a gold rush of
applications, including by some companies with limited experience in
renewable energy.
When renewable incentives
become subsidies to fossil fuel companies
Many of the owners benefiting from these
subsidies have parent companies with
high carbon emissions and a
history of fighting climate policies.
For example, the company with the most
renewable energy projects subsidized under Chapter 313 from 2020 to
2022 is NextEra. NextEra is also the parent company of
Florida Power and Light, a utility that has campaigned against
rooftop solar in Florida and
sued to block hydropower imports in Massachusetts. In Texas,
however, NextEra lobbied for a continuation of Chapter 313 incentives.
Other major energy companies in the owner
list include France’s Total Energy, BP, Duke Energy and Savion, which
is owned by Shell.
The data suggests some possible tensions
within green energy policy.
Environmentalists have long argued for
federal and state subsidies for renewable energy as a means of
combating climate change, including in the
climate- and inflation-focused bill currently in Congress.
However, as our data analysis shows, the
owners who benefit from renewable energy incentives can in some cases
be the same fossil fuel companies that actively oppose a green energy
transition.
The results of a 2021 study, using data released by energy
companies on earnings calls, also suggest that energy company
investments in renewable energy projects are often simply
diversification strategies – they aren’t replacing fossil fuels.
Our analysis is based on one program in
Texas, but with the size of the Texas renewable energy sector, and the
companies involved, it can offer insights for broader renewable energy
policies.
Key to any subsidy program is clearly
articulating the goals and tracking success in meeting them. If the
goal is to reduce greenhouse as emissions, that means examining who is
benefiting and determining if the subsidies are actually leading to a
transition away from fossil fuels.
Our data begins to shine a light on the
answer.
This article is republished from
The Conversation, a nonprofit news site dedicated to sharing ideas
from academic experts. It was written by:
Nathan Jensen,
The University of Texas at Austin College of Liberal Arts and
Isabella Steinhauer,
The University of Texas at Austin College of Liberal Arts.
Read more:
Nathan Jensen previously received
funding from John and Laura Arnold Foundation for peer-reviewed
research on the Texas Chapter 313 Program.
Isabella Steinhauer does not work
for, consult, own shares in or receive funding from any company or
organization that would benefit from this article, and has disclosed
no relevant affiliations beyond their academic appointment.
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