Power Banks: Do Tax Equity Investors Add Value to Renewable Power Projects?

43 Pages Posted: 1 Feb 2023 Last revised: 30 Apr 2023

See all articles by Daniel Garrett

Daniel Garrett

University of Pennsylvania - Finance Department

Sophie Shive

University of Notre Dame - Department of Finance

Date Written: September 4, 2022

Abstract

Tax equity investors in renewable power projects, generally large banks, have deep investment experience but little technological expertise. Do they add value commensurate with their required returns? In 529 U.S. solar and wind plants from 2006-2022, tax equity is associated with higher quality projects for measures that affect its returns. Projects are built faster and produce 5% closer to capacity but have lower revenue per megawatt produced and per dollar invested, negatively affecting equity sponsor returns. Two natural experiments suggest that the greater efficiency is due to monitoring or up-front contracting by tax equity investors and not merely to project selection.

Keywords: renewable power, infrastructure, tax credits

JEL Classification: G38, G21, G32

Suggested Citation

Garrett, Daniel and Shive, Sophie, Power Banks: Do Tax Equity Investors Add Value to Renewable Power Projects? (September 4, 2022). Available at SSRN: https://ssrn.com/abstract=4344966 or http://dx.doi.org/10.2139/ssrn.4344966

Daniel Garrett

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

HOME PAGE: http://fnce.wharton.upenn.edu/profile/danielgg/#research

Sophie Shive (Contact Author)

University of Notre Dame - Department of Finance ( email )

P.O. Box 399
Notre Dame, IN 46556-0399
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
194
Abstract Views
599
Rank
286,955
PlumX Metrics