Why Master Limited Partnerships are a Lousy Policy for Solar, Wind, and Taxpayers

SLevy comment: This post is to present the rationale for not including renewables in the Master Limited Partnership legislation. So we have both pro- and con- arguments on proposed legislation so that you, the reader, can provide your opinion as to whether our federal legislature representatives in both houses should or should not support the MLP parity act. Send in your comments and we will post them on our site.

Master Limited Partnerships (MLPs) operate like publicly traded corporations, with publicly traded stock, but don’t pay income taxes. Most folks who’ve touted expanding MLPs to include renewable energy projects see this move as “leveling the playing field.” And it will. It will allow big energy corporations to avoid paying taxes on their renewable energy projects just like they do for pipelines. First, there are many powerful, regulated industries that would love a bite at this apple, like the existing electric and gas utilities. The cost to taxpayers from letting these hogs get to the trough is likely much, much larger than the opportunity for renewable energy. These big industries – with huge lobbying budgets – are not likely to miss the opportunity.

But even more important, the extension of MLPs to renewable energy is likely to reinforce centralized, corporate control of the energy system. Right now, renewable energy – particularly solar – is transforming the energy system. It’s turning energy consumers into producers, re-routing energy dollars back into community economies, and giving cities and towns more control over their energy future. Half or more of new solar power in the U.S. is being put on the rooftops of homes and small businesses. New community solar policies (like one just adopted in Minnesota!) are giving even more Americans a chance to have skin in the energy game and share in the profits of a transition to renewable energy.

The average American isn’t going to be a shareholder of a Master Limited Partnership, but they probably will pay a share of phantom taxes in their electric and gas rates if MLPs are expanded to other energy industries. Even if Congress miraculously limits the MLP expansion to just the renewable energy industry, subsidiaries of most of the large corporations in the energy business (Shell, BP, Exxon) are building wind and solar projects. These subsidiaries would certainly be reorganized as MLPs, giving them a tax advantaged opportunity to crowd out competitors (like community solar or other distributed generation) AND make larger profits off their renewable energy business.

John Farrell authored the original article