By Patricia Eggleston
For U.S. clean tech companies with global operations, events such as tornadoes, hurricanes, port strikes and civil unrest, can shut down suppliers for months and threaten the financial resiliency of a company that does not have a business continuity and recovery plan. According to the Chubb 2012 Clean Tech Industry Survey, three out of four clean tech companies operate internationally, leaving them exposed to these very risks which may quickly threaten the financial stability of their business. In addition, 40 percent of clean tech companies surveyed depend on foreign businesses for their supply chain, yet 59 percent do not have an up-to-date business recovery plan and at least 50 percent are not proactively planning for or protecting against disruptions caused by weather-related events.
Why is there a disconnect? As innovators, clean tech executives are accustomed to the risks and constant changes that are a part of their industry. While clean tech executives are busy developing technology, securing funding and increasing sales, some may miss the global risks, such as supply chain resiliency, that could threaten their business. For instance, earlier this year China reportedly shut down numerous factories due to heavy smog—a move that could quickly create costly production delays for clean tech firms awaiting the delivery of components in the U.S.
Developing a business continuity plan can mean the difference between long term survival and succumbing to a catastrophe, especially for small to mid-size businesses. According to the Federal Emergency Management Agency (FEMA), 40 percent of small businesses do not reopen after a weather-related disaster. Begin by assessing all parts of the supply chain—including your supplier’s supply chain—to expose any weaknesses. If your company obtains a key component from a single location, that’s a red flag and could indicate potential trouble. A global property and business income insurance policy can help bolster strong supply chain management by providing a firm with a financial cushion for loss of income and extra expenses if operations are halted due to property damage caused by natural disasters or other causes.
Not sure where to start? Talk to your insurance agent or broker to learn how you can develop or update your business continuity plan. Some insurance companies may also offer online or print resources to help clean tech companies develop a plan. Clean tech companies that prepare now may be able to avoid a costly loss in the future.
Patricia Eggleston, a vice president and commercial underwriting manager for the Chubb Group of Insurance Companies, is based in Englewood, Colorado, and can be reached at email@example.com.
On April 24, 2013, a bipartisan group of senators and representatives reintroduced a revised version of the Master Limited Partnership Parity Act (the MLP Parity Act) to the Senate and House. Currently, a company can qualify as a master limited partnership (MLP) only if at least 90 percent of its gross income consists of "qualifying income," including income form the production and sale of oil and natural gas, coal extraction, and pipeline projects.
The MLP Parity Act would enable clean energy companies to qualify for MLP status by expanding the definition of "qualifying income" to include income from clean energy resources, including wind, solar, biomass, municipal solid waste, hydropower, and hydrokinetic energy. The expanded definition would also include waste-heat-to-power, carbon capture and storage, energy efficient building properties, and biochemicals, and would allow for income from certain transportation fuels to qualify, such as cellulosic, biodiesel, and algae‐based fuels. A company could qualify as an MLP under the MLP Parity Act only if at least 90 percent of its gross income is included in one or more categories of qualifying income, as modified by the MLP Parity Act.
MLPs offer significant benefits to investors. An MLP is a business structure that is taxed as a partnership, but its ownership interests are publicly traded like a corporation’s stock. This means that unlike corporations, which are subject to two-layers of tax (corporate-level tax on income and shareholder-level tax on the receipt of dividends), MLPs provide for a single-layer of tax. MLPs do not pay taxes on profits. Rather, the income of the MLP flows through to its partners, who are taxed on their share of the MLP’s income at their own rates and who are not taxed on the receipt of cash distributions from the MLP. In addition, taxable income of the partnership is reduced by non-cash deductible expenses (e.g., depreciation and amortization), which typically provide a "tax shield" to the partners of up to 80 to 90 percent of the amount of cash distributions from the MLP (i.e., partners recognize taxable income equal to 10 to 20 percent of the amount of cash received from the MLP). The tax-deferred portion of the distribution reduces a partner’s basis in its MLP units and is taxed upon a subsequent sale of the units. In addition to the tax benefits, MLPs enjoy greater liquidity than non-publicly traded limited partnerships, since the MLP units are publicly traded on national stock exchanges.
According to the Senate sponsors, a main objective of the bill is to "unleash significant private capital into the energy market." Whether the updated MLP Parity Act will pass both houses of Congress, or become law, is uncertain. In addition, even if the bill passes, it also remains to be seen whether, or what type of, clean energy MLPs will attract significant investment. A common feature of current MLPs is that they have a steady stream of income, e.g. from oil pipeline operations, in order to fund regular distributions. How many clean energy companies fit the financial profile of an attractive MLP investment or whether investors will develop an appetite for companies that may not have the financial profile of current MLPs are other issues that will evolve if the MLP Parity Act becomes law.
of the Master Limited Partnership Parity Act (the MLP Parity Act) to the Senate and House. Currently, a company can qualify as a master limited partnership (MLP) only if at least 90 percent of its gross income consists of "qualifying income," including income form the production and sale of oil and natural gas, coal extraction, and pipeline projects.
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We need your help to push back on the attempts to get Governor Hickenlooper to veto SB 252. Outside groups have waged a campaign of misinformation about this bill. An anti-climate change think tank called the Heartland Institute, the Americans for Prosperity, and others have bought radio, television, print and internet ads against the bill.
|Chris Shapard, CCIA|
Not mentioned in the ads is the historic rise of fossil fuel costs that always get passed onto the consumer, the recent increase in electricity costs from wholesale electricity cooperative associations due to fossil fuel costs that exceed 2% and Colorado’s success thus far with our current Renewable Energy Standard (30% by 2020 for Investor Owned Utilities and 10% for rural cooperatives). Also, not being heard in the noise are the off ramp provisions that if a utility can’t meet its requirement under the 2% rate cap increase (an increase from the current 1%) then their requirement percentage decreases.
The 2010 Colorado Cleantech Action Plan, sponsored by CCIA, state, federal and economic development partners found that a leading driver for cleantech growth was our strong public policy accomplishments – specifically our Renewable Energy Standard. No bill is perfect and SB 252 is no exception but it is a reasonable and important bill for the continued success of cleantech in Colorado.
CCIA actively lobbied and testified in support of this bill to increase the Renewable Energy Standard (RES) from 10% to 20% by 2020 for cooperative electric utilities providing wholesale electricity and large cooperative electric associations with at least 100,000 meters. Consumer costs are capped at a maximum 2% annual increase (up from the current 1%) for compliance with the standard. Compliance off ramps were put in place to decrease the standard for cooperatives who can't meet the goals under the consumer cost cap.
SB 13-252 also:
- Requires 1% of cooperatives' retail sales to come from distributed generation (DG) and .75% for a cooperative with less than 10,000 meters;
- Expands the definition of eligible energy resources to include coal mine and landfill methane if the PUC qualifies the projects to be greenhouse gas neutral;
- Removes the additional RES credit for new generation built in Colorado after Jan. 1, 2015.
Please contact Governor Hickenlooper via phone, email or letter to express your support for SB 13-252.
Last week I fled the snowstorms of Colorado for the spring cherry blossoms in Washington DC to lobby Congress on energy tax reform as part of the Advanced Energy Economy’s (AEE)
first regional chapter fly-in.
Companies and clean energy organizations from all over the country converged in DC to talk to House Ways and Means and Senate Finance Committee Members of Congress and senior staff.
We had companies and associations from North Carolina, Arkansas, Boston, Michigan, California, Maryland, Minnesota and more.
Ed Williams, the CEO of Novinda
, was the industry advocate rounding out CCIA’s team.
Despite the historic gridlock in Congress there is a real bipartisan push to reform the tax code. One message nobody disagreed with is that our current tax policy is broken and because we don’t have a national energy policy, energy tax policy is the driving force for cleantech.
The overall theme of our message was promoting a smarter tax policy - one that is technology neutral, outcomes based and sunsets when a particular goal is met. Unfortunately, the various tax policies benefitting cleantech are composed of one, two and five year sunsets and reauthorizations that combine to create artificial cliffs prohibiting planning and investment. We need to look no further than the recent brinksmanship and damage done by the recent one-year extension of the wind PTC. Instead of a one-year extension of the wind PTC, Congress needs to set a goal - like 5% of our baseload electrical energy from wind or X amount of gigawatts deployed, then the tax benefit sunsets.
Another example I used was in the transportation sector. Congress should set a goal to reduce foreign imported oil for transportation and any domestic technology (electric vehicles, natural gas vehicles, advanced engine efficiencies, biofuels, more transit etc.) that helps to accomplish the goal gets a tax incentive. When the goal is achieved then the tax break goes away. This is especially important in the current context of many traditional energy industries getting tax breaks baked into our tax code with no sunset provisions. The current tax system picks winners and losers and distorts markets thereby decreasing and sometimes flat-out discouraging investment in new innovative technologies.
Democratic and Republican members were impressed that a group came to DC not asking for a handout and volunteering for a sunset to a potential tax provision benefitting their industry. This message especially resonated with Senate Majority Leader Harry Reid’s staff and Energy Committee Ranking Member Senator Lisa Murkowski’s staff.
While this was more of a 30,000-foot discussion on energy tax policy, if tax reform bogs down again in the DC swamp then cleantech needs to be prepared to fight for specific provisions in another temporary tax extenders package. This is of course if we can walk and chew gum at the same time. I’m confident CCIA, AEE and its members can do just that.
As a conversation starter at the Energy Commercialization Center's Energize 2013
conference, I had the pleasure of visiting Snowbird, Utah (my first time in the Utah mountains) and participating in the first effort to connect and build the Rocky Mountain regional cleantech ecosystem. The Energy Commercialization Center at the University of Utah was one of five 2010 DOE EERE-funded Innovation Ecosystem Development Initiatives that will accomplish such activities as pursuing intellectual property protection for technological innovations; nurturing and mentoring entrepreneurs; engaging the surrounding business and venture capital community; and integrating sustainable entrepreneurship and innovation across university schools and departments.
During the course of the two-day event, research organizations, companies and industry trade groups from Utah, Colorado and Idaho met to share best practices and ideas for policy, access to capital, and tech transfer among other topics. My colleagues from Colorado included Dick Franklin, Executive Director of the Rocky Mountain Cleantech Open
, and Steve Berens, Executive Director of the Cleantech Fellows Institute
, who spoke about Rocky Mountain resources for clean technology innovation and entrepreneurship.
My session concerned best practices in cleantech policy and how policy can successfully drive job creation. While the surrounding states are not yet as organized as Colorado, there's a lot we can do together to facilitate the cooperation to grow our clean technology industries. One of the best parts of the program was meeting new partners like RenewableTech Ventures
and Navillum Nanotechnologies
that I can plug into Colorado's clean tech universe. I look forward to future collaboration with Utah's Energy Commercialization Center and the ongoing energy conversation.
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