By Keith Goldberg

Law360 (March 13, 2020, 11:04 PM EDT ) Coronavirus-fueled disruptions in global supply chains for renewable energy projects have developers on edge that the resulting delays could jeopardize power purchase agreements and federal tax credits that are crucial to their projects getting built.

Force majeure notices are already rolling in from solar and wind equipment manufacturers, citing unforeseen circumstances that prevent them from fulfilling their contractual obligations to project developers. The notices stem from production delays and supply shortages in China and other countries hit hard by COVID-19, the disease caused by the new coronavirus.

The domino effect could be delays in renewable project development timelines. Experts say there is concern that some projects could not only blow operational deadlines contained in power purchase agreements, or PPAs, that developers have inked with electricity buyers, but also project completion deadlines they must meet to reap the full available value of the federal investment tax credit for solar projects or production tax credit for wind projects.

Any threats to the viability of a PPA or tax credit eligibility could also give investors second thoughts about sinking cash into renewable projects, experts say.

"There's quite a bit of angst, I would say, in the market," said Kaam Sahely, who co-heads Vinson & Elkins LLP's energy transactions and projects practice group and represents both renewable developers and investors.

Part of what's driving the angst is that force majeure notices that developers have been receiving from manufacturers have been broadly written and don't fully outline the scope or duration of the production problems, experts say.

"Until the [equipment manufacturers] can put together something credible as to what the exact disruption is and how long it will last, we're still in the clouds on this," said Stoel Rives LLP energy development partner Anthony Girolami, who works on U.S. and international renewable project development.

There's also the question of how far the supply-chain disruption will spread, experts say. Even if U.S.-based developers can get their needed equipment from Asia or Europe, the COVID-19 outbreak could affect their ability to construct and install their projects on time, Sahely said.

"I think, initially, people thought about solar, because they're shorter-timeline projects and more of the manufacturing chain is in China," Sahely said. "Now, people are starting to worry about wind as well."

Sahely said PPAs usually provide some relief for project developers in cases of force majeure, but they also contain long stop dates for project completion regardless of force majeure.

"I would say that's in the back of people's minds," Sahely said.

The more imminent concern is whether any coronavirus-fueled delays will cost developers a chunk of their their federal tax credits, experts say. For example, wind developers who began construction in 2016 in accordance with Internal Revenue Service guidelines must have their projects up and running by the end of 2020 in order to claim the full value of the production tax credit, and all PTC-eligible projects must show continuous construction efforts per the IRS guidelines.

The IRS has similar start-of-construction requirements for solar developers hoping to collect the investment tax credit, which began phasing down in value this year.

Girolami said developers could try to seek extensions from the IRS based on the claim that coronavirus-related supply disruptions constitute an "excusable disruption" of their of continuous construction efforts, but blanket guidance from the agency is preferable.

"We're really looking at making a lot of claims to the IRS unless they come out with a blanket statement allowing for this type of claim on an expedited basis, as long as you can show what the time impact was," Girolami said.

Keith Martin, the co-head of Norton Rose Fulbright's U.S. projects practice, said the solar and wind industry may also look to get a piece of potential tax relief in any congressional coronavirus-related financial aid package. U.S. House Speaker Nancy Pelosi, D-Calif., said late Friday that a deal on such a package was reached with the Trump administration.

Whether that's enough to placate would-be tax equity investors in renewable projects remains to be seen. For example, Martin noted that Bank of America Corp. and JPMorgan Chase & Co., the two biggest players in the tax equity market, have said publicly that they haven't yet decided whether to finance wind projects that started construction in 2016 that aren't completed by the end of 2020.

"Eventually, the issue will have to be addressed," Martin said.

Another investor issue affecting developers is that lenders require independent certifications that a project is on track to be completed before allowing borrowers to draw cash from the lending facility. That could get more complicated if developers face serious project delays, Martin said.

"There's such an intense competition among lenders to finance projects that they'll probably provide some latitude here," Martin said. "But at some point, it becomes a more significant issue."

Whether lenders, tax equity or otherwise, continue to sink money into renewables projects facing coronavirus-related delays likely depends on how far down the development timeline a project is, experts say.

Mona Dajani, who leads Pillsbury Winthrop Shaw Pittman LLP's renewable energy practice and co-leads the firm's energy and infrastructure projects team, said the status of key legal agreements governing a project will also play a role in whether concerns over coronavirus-related development delays derail a project.

"Those deals that are well underway, those are still going forward," Dajani said. "The ones where they've pulled the plug are the ones that are too new."

--Editing by Emily Kokoll and Jill Coffey.

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