Geoff, responses to two of your comments here:
2. "the creation of a project will creat long term tax payments to the government even if some of the tax payments are offset by the grant program". With all due respect, this argument contradicts the basic justification for the grants and the impetus for the tax equity market, which came into being because smaller developers weren't paying enough taxes to capture the full benefit of the Production Tax Credit, for which the ITC (converted to cash grants) now substitutes. If developers are in fact paying significant taxes net of incentives and the only issue is timing, then there's no reason to provide this convenience (the grants) for large, profitable firms, as I noted in the posting.
Geoff, I'm not positive, but I assume that Kevin was referring to the ongoing tax payments paid by the project and the tax revenues generated by the employment and services contracted for construction and operation of the project. In Oregon, where I used to work, wind farms routinely became the largest property tax revenue stream for the rural counties they were built in, while employing hundreds during construction -- all of whom paid income taxes -- and contracting numerous services companies who do not get the tax incentives offered directly to the wind developer, and thus pay in both business and personal income taxes. I wouldn't be surprised if over the long-term, the wind or solar projects pay out far more in taxes generated than they claim in initial tax credits. This point does not as you say run counter to the whole justification of the program.
3. " there is no elimination of the rigorous review by project lenders and equity investors, as the cash grant only provides a portion of the funding." I would hope not, having participated in many such reviews in my career. At the same time, the tax equity providers that the grants avoid bring a unique, cross-industry perspective to their investments, enabling them to transmit learnings and best practices from projects that have reached operation. The DOE application vetting process can't match this.
I'm still not convinced by this argument. I don't understand why you think the private sector must include tax equity markets in the vetting of projects when 70% of the project financing must still come from private sector debt or equity investors, when the project developers are all private firms that must answer to investors and shareholders, and when the projects must all make power sales to utilities which answer to both shareholders and public utility commissions. There's a hell of a lot of checks and reviews and private skin in the game through that entire process. Forcing these projects to go through tax equity markets to add yet another layer of project assessment makes no sense to me, and strikes me as adding an additional transactional cost that will slow the pace of project development, increase financing costs, and raise project risks.
Consider that almost any other sector of project development -- be it retail or residential construction, fossil energy development, infrastructure projects, etc. -- don't need to involve tax equity markets. Do you think we should force commercial real estate developers to undergo scrutiny from tax equity markets?
I raised this question on your last post on the Section 1603 grants, and this line of reasoning still doesn't convince me for these reasons.