A (3:16)

You, you can do on site work too, right? Like building a road or something like that that's specific for that use of the.

B (3:23)

Yes, and that's a much better approach. If you could put in say 10% of the solar piles, for example, it looks a lot more impressive like you truly have started work on the project. Another issue that people have been wrestling with. Most tax lawyers think that common sense suggests you should know what you're starting work on if you use the physical work test. And so that I think that's important to identify the project in whatever contracts are signed.

A (3:52)

Okay. And in terms of the application across the board, like in the reconciliation bill there the. Is it correct that these rules, these new rules only apply to solar and wind? And so now we've got solar and wind having one set of rules and other assets like energy storage having a different set of rules. How is this going to work?

B (4:14)

It's even worse than that. These rules have been tightened just for solar and wind, but not for avoiding parts of the FIAC restrictions on use of Chinese equipment for that purpose. The deadline is the end of this year to start construction. And. And the existing construction start tests still apply even to solar and wind for batteries, geothermal, pump storage, hydro, anything that otherwise qualifies for tax credits that is not solar and wind. The construction start tests have not changed.

A (4:47)

And how about the time period you have to complete construction?

B (4:51)

That didn't change either. It's generally four years there. There was a 10 year period for projects on federal land, but there's some uncertainty about whether that has carried over. It clearly does not carry over for solar and wind starting construction on September 2nd or later. As to projects that started before and for non solar and wind, there's room for debate.

A (5:16)

All right, I'm going to switch off this start of construction guidance that came out in just since I got you pick your brain a little bit in terms of now that you've had I guess almost two months now to see what the impact of the big beautiful bill is here. What do you think were in practice the, the most important changes that are going to have lasting consequences on the renewables market?

B (5:44)

I think there are two. One is the tax credits are being wound down more quickly than they were supposed to be. But I think the issue for the developers is many of them have low, large pipelines of projects that are already under construction that will carry them through the full Trump term. So the pain is notable, but it's not insurmountable. And part of the game is to just live to fight another day. I've been at this for a long time, as you have. We've seen these tax credits since 1992. They have come and gone and they could very well come again. The other part is the FIAC restrictions, which require a three part analysis. One is there's a limit on the amount of Chinese equipment that can be used. A second limit is on taxpayers who have too much Chinese investment or debt or participation in management. They can't claim tax credits. And then the third part, which is the stickiest, is if you have contracts, for example, with Chinese suppliers, the contracts can't give those suppliers of equipment effective control over your project. And that part is retroactive. People need to be scrubbing those sorts of contracts already this year. If they've made payments under them, it may be too late to salvage tax credits for next year. There's a one year look back. I think that's the bigger issue. There were people in Democratic ranks who thought that the FIAC rules were so complicated purposely to set up a maze out of which no one can emerge. I don't think we're in that camp. We think they're largely workable, but the jury's still out in some set corners of some of the opinions we're being asked to write. The bigger issue is not the obba, but just the obstruction that we're starting to see industry wide from the Trump administration. Various agencies are now piling on Transportation, agriculture, the Department of Interior, making it hard for projects to get any approvals to move forward. And you saw on Friday night Trump stopped construction of the nearly complete Revolution wind farm off Connecticut and Rhode Island. A lot of people think that will follow the same pattern as the Empire project that he stopped construction on, but then relented after the CEO, I assume, called. And in this case, he probably wants to hear from the governors of Connecticut and Rhode island about what they can offer him to let construction resume.

A (8:29)

What I say two questions for you. One is in thinking about how this is going, if you looked at the headlines and you saw that the phase out of the ITCs, PTCs was really targeted towards wind and solar, it seemed like energy storage really got through mostly unscathed. But then you look at the fiat restrictions and those probably are more burdensome on energy storage. How, from the feedback that you're hearing in the marketplace. Do you think that the energy storage market is really going to be damaged by the fiat rules or do you feel like there's ways to obviously they have to comply with them, but that it's just a matter of kind of being aware of them and contracting carefully?

B (9:21)

I think this is a real challenge for battery developers. The rest of the market, not one insular got to the end of 2033 to start construction and claim full tax credits and end of 2035 to claim partial tax credits. But with batteries, 69 to 77% of the components for lithium ion batteries come from China. Ironically, the fiat limits on use of Chinese equipment set a higher bar for batteries to meet than for solar and wind power projects. For example, they have to have less than 45% Chinese equipment from the start and that ratchets down to less than 15% after 2029. This is based on when construction starts, whereas for power projects it's less than 60% Chinese equipment initially ratcheting down to 40%. So I think that that will be a real challenge for the battery industry. They need to start construction more importantly than others by the end of this year to avoid those limits on Chinese equipment.

A (10:32)

And last question for you on the executive order which you touched on. You know it's not just the offshore wind, but there's now seems to be impediments for developing on federal lands and receiving approvals from federal agencies. How much of an impact do you see that happening?

B (10:51)

Having that that's open for debate. I know our real estate team thought that about 5% of projects require approvals from the Department of interior. That includes BLM, U.S. fish and Wildlife and others. But I think there are people in the market who think the required approvals reach more broadly. There are 69 separate approvals that one might need. And there was a letter from the governor, Nevada, very well written Republican who said to the Secretary of Interior, look, I know you're trying to promote fossil fuels. We don't have them in Nevada. What we have is sunlight. And you have to have a process here that allows us to generate electricity we need for data centers, casinos, whatever else requires electricity there. I think we're going to see an emerging political issue as the price of electricity goes up. We're already seeing some pushback from regulators about price increases. Utilities are requesting one at one risk to keep an eye on is do we see some re regulation of the industry over time just because the industry can't provide the electricity. It has one arm tied behind its back now and then the regulators get frustrated. Frustrated state legislators. This is an emerging political problem. Could it also be a break on economic growth?

A (12:17)

Yeah, I mean, that's a bigger macro issue, I guess. Probably too big for us, but anyway, well, that's for another day. Appreciate your time today, and I'm sure given the way the market's evolving here, I'll be talking to you again on this podcast soon.

B (12:31)

Okay, Todd, nice to talk to you. Salute.

A (12:37)

You can find us online at www.proctor project finance law or send us an email at currentsordonrosefulbright.com please rate, review and subscribe on Apple Podcasts, Spotify or your preferred podcast app. Our show today was produced by Emily Rogers.

B (12:53)

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