Over the last several years, a confluence of political and market developments have made capital for renewable energy projects harder to come by, which has affected the ability of unregulated affiliates of public utilities (“Unregulated Utilities”) to finance or refinance new and existing renewable energy projects. As unregulated utilities search for capital, they increasingly are considering the use of tax-efficient public capital vehicles such as real estate investment trusts (REITs), master limited partnerships (MLPs), and umbrella partnership C corporations (Up- Cs). This memorandum will compare and contrast those three vehicles and explain how and why those vehicles can play a helpful role in satisfying the current and future capital needs of unregulated utilities.

Current Political and Market Developments -

In analyzing the sources of capital for renewable energy projects, it is difficult to evaluate political developments without also considering market conditions, and vice versa, because the two are so intertwined. Indeed, the political discussion around renewable energy starts with a simple market truth: Although most people would prefer to obtain their energy from renewable sources rather than burn fossil fuels, the upfront capital costs of renewable energy projects often make these projects unfeasible from an economic perspective. Put simply, consumers are eager to go green until it costs them too much green, at which point they are more than happy to burn fossil fuels. Thus, if the government wants to increase consumer reliance on renewable energy, it must find a way to subsidize that reliance.