Renewable Incentives: Stimulus Bill

Joe H — Fri, 01 May 2009 17:11:15 +0000

If you have distilled the 800 plus page Stimulus Act down to the 33 pages on Energy, you still recognize that quite a bit is unclear on what changes have been made and their ultimate impact.

A regulatory attorney from Chadbourne & Parke did an admirable job on simplifying this into 5 key areas:

Production Tax Credit: this has been extended to 2012 for wind and 2013 for all other technologies
Investment Credit: a developer has the option to take this credit or the PTC. In effect, the IC is a cash grant from Treasury for 30% of project capital costs and will be payable in 60 days. It was emphasized that this is the first time the government has provided an outright cash payment. Importantly (unbelievably?), there is no cap per project and there is no total cap on Treasury funds. Projects must be completed in 2009/2010 and be located in the US and owned by US investors (other strings also exist).
Bonus Depreciation: 50% can be taken after startup with the remaining taken under “normal” conditions. Projects must be in service in 2009 and must be new builds.
DOE Loan Guarantee Program: $6 billion has been allocated for guarantees on ALL technologies and up to 80% per project. Since 2005, DOE has provided zero guarantees, but with the change from innovative technologies to all technologies it is expected that this could have signficant impact.
Manufacturing Tax Credit: $2.3 billion is available for companies who produce components for the renewable energy industry.

The Investment Credit was identified as the biggest coup for the RE industry.

Time for a Green Bank?

Joe H — Fri, 01 May 2009 14:51:33 +0000

While initially proposed in the 110th Congress, the concept of a clean energy investment administration and fund are being refloated by the Senate’s Energy & Natural Resources Committee. Principally, the draft bill has been created to improve the DOE’s loan guarantee program that was authorized in the Energy Policy Act of 2005 (EPACT) and then modified and funded within the American Recovery and Reinvestment Act (ARRA).

The purposes of the draft bill are to create a “self sustaining Clean Energy Development Administration” that in combination with private capital will support an attractive investment environment and affordable financing for:

clean energy technologies,
advanced or enabling energy infrastructure technologies,
energy efficiency technologies in residential, commercial and industrial applications and
advanced manufacturing technologies.

In addition to the creation of an administrative oversight group, a Clean Energy Investment Fund will be established and funded by the Treasury. Capital as committed by the EPACT and ARRA (for energy) shall be in the form of direct loans, letters of credit, loan guarantees and/or other types of credit or debt instruments. $10 billion is to be initially allocated to the Fund by Treasury. The private sector is also encouraged to indirectly participate in order to aggregate (and ultimately syndicate) debt positions held within the Fund.

As clean energy is defined within the draft bill, it is expected that a broad range of technologies would meet the requirements and objectives and (at least) match the $6 billion for renewables and $2 billion for batteries and electric car applications spelled out in the ARRA. By creating this type of administrative entity and fund, DOE should be able to more effectively and efficiently provide capital support as initially contemplated in EPACT. The first loan guarantee (under the original EPACT!) was made on 20 March 2009 to Soyndra ($535 million to support construction of a facility to manufacture solar panels). The creation of an appropriately staffed administration with deep technical and financial skills will only help to ensure the best use of taxpayer money as it is to be deployed in new technologies. Perhaps they should also review projects competing for grants on their economic and technical merits??

The Energy & Natural Resources press secretary indicated that there was no shortage of highly skilled financial talent sending resumes to his committee and the DOE to support this and other initiatives.

As background, the significant differences to the loan guarantee language from the original EPACT and the ARRA are outlined below. Simply, the ARRA allows for loan guarantees to be made for more common renewable technologies and for manufacturing.

Then (EPACT):

In General- The Secretary may make guarantees under this section only for projects that–

avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases; and
employ new or significantly improved technologies as compared to commercial technologies in service in the United States at the time the guarantee is issued. [emphasis added]

Now (ARRA):

In General- Notwithstanding section 1703, the Secretary may make guarantees under this section only for the following categories of projects that commence construction not later than September 30, 2011:

Renewable energy systems, including incremental hydropower, that generate electricity or thermal energy, and facilities that manufacture related components.
Electric power transmission systems, including upgrading and reconductoring projects.
Leading edge biofuel projects that will use technologies performing at the pilot or demonstration scale that the Secretary determines are likely to become commercial technologies and will produce transportation fuels that substantially reduce life-cycle greenhouse gas emissions compared to other transportation fuels

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Renewable Incentives: Stimulus Bill

Time for a Green Bank?