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www.sname.org/sname/mt October 2012 and encouraging the development of land- based renewable generation. e program, which was created by the American Reinvestment and Recovery Act of 2009 and is administered by the Treasury Department, provides cash grants to renew- able energy projects equal to 30% of the projects installed costs, thereby lessening the need for tax equity investment in proj- ects. Simplicity, transparency, and certainty?along with the speed with which payments were processed and the perceived certainty of grant payments?are seen as key attributes of the programs success. Master limited partnerships are seen as a possible mechanism for expanding the pool of potential investors in oshore wind projects. Master limited partnerships are nancing vehicles that enable the benets generated by a project (tax credits, in the case of oshore wind projects) to pass through to the stock or equity owners of the partnership. e use of these partnerships would thus deepen the pool of potential tax equity investors in oshore wind projects beyond large investors (primarily nancial companies) with signicant tax burdens. However, monetizing the tax benets gen- erated by oshore wind projects would require legislative changes to enable tax credits to be applied to ordinary income as opposed to passive income. In a similar vein, adopting elements of the design of Section 42 low-income housing tax credits could encourage tax equity investment in oshore wind. ese low-income housing tax credits are viewed as a good way for companies to improve their credit ratings with credit rating agencies. e process of permitting oshore wind facilities in the U.S. also is a key area of U.S. poli- cies that deal with oshore wind. Administrative changes to the implementation of the National Environmental Policy Act review process could enable increased public participation when reviewing the potential environmental impacts of a project, thereby reducing the risk of law- suits later in the course of the projects development. A one-stop shop? approach to permitting could lead to earlier decisions on whether projects could proceed. Similarly, general permits or additional information on the Atlantic Wind Energy Areas could lead to faster pre-permitting activities. e question of how the Bureau of Ocean Energy Management should assess fees for the use of the Outer Continental Shelf for wind energy production is often raised. Among the options to consider are the use of estimates of a projects production in future years, the use of rolling averages of production, and actual metering of energy produced by a project. Fee levels could be set as a percentage of the wholesale electric- ity prices, rather than of the power purchase agreement sale price, but this would expose fee levels to price volatility. Finally, some express concern that the structure of lease payments could favor new entrants to the market, rather than established developers who have been working on projects while the leasing pro- cess has been developing. e ability to successfully develop and operate projects should be rewarded to prevent the possi- bility of claim sitting? by unqualied applicants who secure leases as a specu- lative investment with no intention of developing a project. Dierent development Of the four nancial structures that are most often seen for oshore wind farms, the one that will lead to development in the U.S. in the short term will be project nanc- ing. ere are a tremendous number of lessons to be learned from the European project nance experience and the devel- opment dollars being spent in the U.S. are beneting from these lessons. In the longer term, more sustainable structures must become more feasible. Ultimately the struc- ture that enables the lowest cost of capital will result in a substantial reduction in the cost of energy, and therefore the greatest feasibility for the oshore wind industry. Although there are many lessons to be learned from the European policy experi- ence when it comes to building a U.S. oshore wind industry, things in the U.S. ultimately will develop dierently. e key contribu- tion that the federal government can make towards creating this industry isnt to create rich nancial incentives. Although this would help, it is not necessary. e American oshore wind market will be driven by tech- nological and nancial innovation, not subsidies, and this fact will result in a much healthier long-term outlook. An ecient leasing process is the most important con- tribution that the federal government can make to creating the industry. MTChristopher G. Hart is founder of OPTIMUM Oshore Wind Energy Systems, LLC, providing advisory and consulting services to global entities. THE AUTHOR THANKS JESSE JOHNSON AND AMY KONIGSBURG, CONSULTANTS TO THE U.S. DEPARTMENT OF ENERGYS WIND AND WATER POWER PROGRAM, FOR HELPING TO COLLECT AND CONVEY MUCH OF THIS INFORMATION IN ITS EARLIEST FORMS; AND BRYAN MARTIN, MANAGING DIRECTOR FOR PRIVATE EQUITY AT THE DE SHAW GROUP, WHO PROVIDED INPUT AND COMMENTS. e American oshore wind market will be driven by technological and nancial innovation, not subsidies.