How compliance can make or break your clean energy business

Compliance management can make or break your business, especially when public funding and tax credits are involved. With clean energy project finance and funding opportunities rising nationally following the Inflation Reduction Act (IRA), complying with regulations and reporting requirements is more critical than ever for renewable energy owner-operators seeking to capitalize on a raft of federal tax credits and other incentives. 

Public programs like the Greenhouse Gas Reduction Fund (GGRF) and various tax credits not only push specific projects over the line to profitability, but they also help to encourage more private investment in the sector. The sustainable infrastructure market is booming, with over $147 billion invested this year — here’s how to ensure your business participates successfully, profitably, and in compliance. 

What is compliance management?

Compliance management is a crucial part of project finance. Compliance requires clean energy developers and financiers to confirm they followed laws and regulations in the area they are developing and be able to prove it through documentation. Owner-operators and developers must also prove to investors and the IRS that their projects will comply with all regulations.

Particularly on a project’s front end, developers can take a proactive step to ensure they have all the necessary documents and reports to meet investment requirements — for example, proof that a project fulfills certain IRA requirements, such as guidelines for the law’s domestic content bonus, if a project plans to qualify for this additional credit. Being able to access performance benchmarks in the future for when policies change or new credits become available is another boon. 

From a regulatory standpoint, compliance might look like ensuring that a certain percentage of a project will benefit low-income and disadvantaged communities, if that is part of a public program’s requirements. Compliance with tax credit guidelines can include meeting domestic material or prevailing wage qualifiers, and financial compliance varies from loan to loan but typically involves meeting the qualification requirements to access project financing.

While compliance can be reactive — regulations are often changing, such as the IRA’s prevailing wage policy and GGRF compliance with the Davis-Bacon law — taking a solely reactive approach can land you in hot water with the IRS. Keeping accurate, easily accessible records on each individual project helps developers and owner-operators to not only ensure compliance with various regulations but also quickly produce documented proof for regulators and investors, if it is ever required. 

In a climate finance context, adhering to federal, local, and loan compliance is critical to accessing public funding from organizations like green banks and community development financial institutions (CDFIs) as well as clean energy tax credits. Funding is competitive; even though there’s lots of cash in play, investors rarely greenlight projects they don’t see as high quality. What that quality looks like differs from investor to investor. Still, without proper documentation on how you will meet regulatory requirements, it’s unlikely that investors will choose your project to receive funding, or it will be much harder to access favorable terms. Gathering information in real time is critical — a retroactive approach makes it extremely likely that documents will fall through the cracks. 

Documenting the entire financial life cycle of a project is critical, particularly when state or federal public funding is involved. But keeping track of that project finance data can be tricky, especially across varied platforms, documents, and stakeholders. 

An uptick in clean energy

Clean energy projects are increasing, and so is the paperwork. 

The market is moving fast — 10 years ago, the United States invested $52 billion in clean energy. Now, we’ve almost tripled that number. The amount of paperwork, reporting requirements, and hurdles to overcome skyrocket proportionally with every new project, driving up the cost of capital and sometimes rendering a project unprofitable for potential financiers. 

Filling out all the requisite forms and applications to successfully comply with reporting requirements takes time, money, and people-power. As the sustainable infrastructure market scales to meet the demands of the world’s sustainability goals, it will also require technology. 

Having timely, accurate data stored in one single location empowers developers and owner-operators to take control of their compliance management, presenting potential financiers with a polished, clear accounting of each individual project. By working alongside financiers to develop clear standards for project finance documentation, owner-operators can build financiers' trust and move the entire industry toward a more streamlined system.

We need trillions of dollars more in clean investments every year to meet global climate goals — that’s a lot of growth from our current moment. Developing a consistent framework that lets owner-operators and financiers handle that demand will be critical to meeting those goals. 

Green jobs are on the rise: solar jobs are up 46% since the passage of the IRA. With a growing number of renewable energy developers and owner-operators in the industry and sustainable infrastructure funds rapidly scaling up, software solutions are critical to streamline the reporting process, avoid inefficiencies, decrease the margin of error, and ensure that your company complies with all necessary regulations. 

How Banyan Infrastructure can streamline the compliance process

As more renewable projects make their way through the pipeline, effective digital infrastructure will be vital to managing reporting requirements and ensuring compliance with state and federal regulations and other project stakeholders.  

Banyan Infrastructure’s one-stop shop simplifies the compliance and reporting process and helps your company develop the operational readiness required to maintain healthy project data and build trust with potential financiers. Our platform is a single source of truth where your company can gather, store, and organize its relevant compliance and reporting information. That way, whenever you seek funding for new projects or new requirements arise, it’s quick and easy to collate and submit your reporting data through our automated, easy-to-use system.  

Our system also enables you to set alerts and notifications that remind you of upcoming compliance deadlines and avoid missing critical dates. 

Are you looking to upgrade your compliance management process? Chat with us to learn more about how Banyan Infrastructure can help with your company’s compliance and reporting needs.