America's Institutional Energy Infrastructure

Editor’s Note: The Millennial Voices series is written by and for Millennials to foster nonpartisan discussion. Chad Dixon is an Operator at Viridity Energy. The opinions expressed in this commentary are solely those of the author.

Master Limited Partnerships (MLPs) are publicly traded, exclusive investment structures available to a select few fossil fuel energy sources. America’s path to a clean energy future starts with leveling the institutional playing field. Editor’s Note: The Millennial Voices series is written by and for Millennials to foster nonpartisan discussion. Chad Dixon is an Operator at Viridity Energy. The opinions expressed in this commentary are solely those of the author.

Source: Office of Senator Chris Coons (D-DE)

Source: Office of Senator Chris Coons (D-DE)

MLPs are partnerships that allow oil, natural gas, and coal companies to avoid corporate taxes while disseminating profits to investors as dividends.

The price stability of the specific energy source is extremely important to the MLP structure. Recently, MLP investments in oil have seen increased risk with the volatility of natural gas prices.

Over the last year, natural gas has decreased in price, which has increased the risk for investment in natural gas MLPs. The stocks of crude oil giant MPLX Energy Logistics [KF1] and natural gas giant MarketWest have fallen 6 and 11 percent respectively. MPLX has recently announced a purchased of MarkWest to form an MLP worth over $21 billion.

Tax-advantaged MLPs have found favor with investors because they pay out most of their cash flow as dividends. To grow their dividends, MLPs use acquisitions to expand their asset base.
— Tim Mullaney, CNBC

The price of renewable energy on the other hand has recently decreased and attracted massive investment. Bloomberg Finance states that new funds for wind, solar, biofuels and other low-carbon energy technologies in the United States rose 8 percent to $51.2 billion last year. 

In the 114th Congress, Sen. Chris Coons (D-DE) and Rep. Ted Poe (R-TX) introduced H.R. 2883/ S.1656 Master Limited Partnership Parity Act (MLPPA) to extend this type of structure to solar and wind power. The odds of MLPPA passing in this Congress have been estimated to be only 1 percent.

MLPs for fossil fuels have been scrutinized by the Obama Administration, specifically through a termination proposal in their proposed FY 2016 budget.

If approximately 20 percent of all MLPs were renewable energy MLPs, then that would provide the estimated capital needed to make the shift to 30 percent renewable US electricity generation over the next decade.
— National Renewable Energy Laboratory

NRG is a company with over 46,000 MW of fossil fuel generation in the United States.

NRG’s CEO David Crane stated that, “energy produced in a manner that is sustainable and does not contribute to the overriding problem of global warming is what America demands” and “Everywhere we look, in the United States and in emerging markets ripe for solar and wind, there is the bustle of economic activity, new construction and increasing consumer confidence."

NRG sponsors the MLPPA that has been proposed, even though it may raise capital for renewable energy and possibly increase competition for fossil fuel generation.

The MLPPA has a small chance of passing, but it also has bipartisan support and is a symbol of the rising political interest in leveling the playing field for renewable energy.

Chad Dixon is currently an Operator at Viridity Energy where he has since become a PJM Certified Generation Operator. Chad has previously worked at the Department of Energy and received his B.S. in Energy and Environmental Policy with a Concentration in Economics and Public Policy from University of Delaware.


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