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New Financing Option Within Reach

Algae Biomass Organization Executive Director Mary Rosenthal discusses what Master Limited Partnerships would mean for the algae and other renewable energy sectors.
By Mary Rosenthal | November 27, 2013

For many years, renewable energy and fuels companies have been challenged to cross the so-called valley of death, the vast expanse between pilot or lab scale and funding for full-scale commercial production facilities.

In October, I sat on a roundtable discussion at the launch of the bipartisan Congressional Algae Caucus, chaired by Reps. Matt Salmon, R-Ariz., and Scott Peters, D-Calif., and heard broad support from lawmakers from across the country for allowing renewable energy companies to organize as Master-Limited Partnerships.

Anyone familiar with MLPs knows that making this option a reality has been discussed for some time, but has not been a top priority for many in the renewable energy industries. That needs to change.

Why? Because this is one policy goal that is achievable in today’s difficult political environment, and could open a flood of new financing for projects in biomass, biofuel, wind, solar and other clean technologies. Unlike other forms of incorporation, MLPs are taxed as partnerships, but have ownership interests that can be traded like corporate stock on a market. As a result, MLPs often enable easier assembling of the capital needed to get large projects off the ground. This advantage would be especially useful for propelling new clean technologies across the valley of death.

Unfortunately, none of the capital that can be attracted by the MLP arrangement can support renewable energy today. That is because current regulations restrict MLPs almost exclusively to oil and gas projects. Biofuels, wind or solar projects are left out in the cold. There is no inherent reason for this deficiency; it seems to be nothing more than an accident of legislative history.

Fortunately, with so many worthy renewable energy technologies clamoring for capital, there is legislation to change the rules and enable renewable energy projects to qualify for MLPs. In the Senate, Sens. Chris Coons, D-Md., and Jerry Moran, R-Kan., have proposed the Master Limited Partnerships Parity Act. In the House, there is HR 1696, the Master Limited Partnerships Parity Act, cosponsored by Reps. Ted Poe, R-Texas, and Mike Thompson, D-Calif. Both of these pieces of legislation are accruing broad support. Republicans and Democrats have signed on to the change. Financial institutions have voiced support because they see the rise in clean energy investment and would like the tools to bring more resources to bear. 

To move forward, these bills need more cosigners. Members of Congress need to hear words of support from their constituents. I urge you to pick up the phone if you have not done so already. 

The slow pace of gathering enthusiasm contradicts all the economic evidence. The advanced biofuels and biomass energy industries are looking to construct a new wave of projects. Clean technology is attracting nearly a quarter of global venture capital, and other sources of capital are clamoring for a way in. Resilient support at the state level foretells a steady increase in demand for renewable energy for some time to come. 

Clearly, the time to make this change is now.  The Algae Biomass Organization is making an update to existing MLP regulations a priority, and we welcome any biomass industry players are ready to voice their support.

Author: Mary Rosenthal
Executive Director, Algae Biomass Organization
mrosenthal@algaebiomass.org
763-458-0068

 

2 Responses

  1. A Concerned Taxpayer

    2013-11-28

    1

    MLP's did not work 8 years ago. After the stellar track record of the DOE's algae research grants why would any investor invest in Master Limited Partnerships? FACT: The DOE admits that less than 20% of all algae technologies ever get commercialized. FACT: The DOE claims algae research grant recipients have used taxpayer dollars for personal use. FACT: With 60 years of algae reasearch not one algae rsearcher at any university has commercialized anything. FACT: 51% of all algae research grants have been cut in 2013. FACT: The Inspector Generals office is investigating research grants, use and results. FACT: "Washington, the DOE's Inspector General published a 24-page Follow-up Audit of the Department of Energy's Financial Assistance for Integrated Biorefinery Projects", which found that "despite over 7 years of effort and the expenditure of about $603 million, the Department had not yet achieved its biorefinery development and production goals." Biofuel Digest - September 18, 2013"

  2. Richard Rodriguez CPA

    2013-11-30

    2

    MLP's may be good for green energy projects provided the govt does not regulate trading rules and provided the obama administration could not use this as a tax revenue source for obamacare. Any investor could also say this sounds like another mortgage debacle bubble emerging. Gurantee company funding and trading? What does the investment community say?

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