Treasury, Energy Announce More than $3 Billion in Recovery Act Funds for Renewable Energy Projects
Today, the U.S. Department of the Treasury (the "Treasury") and the U.S. Department of Energy (the "DOE") announced an estimated $3 billion for the development of renewable energy projects around the country. Funded through the American Recovery and Reinvestment Act ("ARRA"), the program will provide direct payments in lieu of tax credits in support of an estimated 5,000 bio-mass, solar, wind, and other types of renewable energy production facilities.
ARRA authorized the Treasury to make direct payments to companies that create and place in service renewable energy facilities beginning January 1, 2009. A company can only apply for payment after the renewable energy property has been placed in service. Previously these companies could file for a tax credit to cover a portion of the renewable energy project's costs; under the new program, applicants would agree to forgo tax credits down the line in favor of an immediate reimbursement of a portion of the property expense. This direct payment program allows for an immediate stimulus in local economies.
In recent years, the tax credit has been widely used. As an example, in 2006, approximately $550 million in tax credits were provided to 450 businesses. However, the rate of new renewable energy installations has fallen since the economic downturn, as projects have had a harder time obtaining financing. The Treasury and DOE expect a fast acceleration of businesses applying for the announced energy funds in lieu of the tax credit.
To expedite implementation of the program, the DOE and Treasury have made the terms, conditions, guidance, and sample application available at www.treas.gov/recovery/1603.shtml. The Treasury and DOE are not accepting applications yet, but these available forms will allow companies to prepare applications and expedite the implementation of the program when the government is ready for submissions on August 1, 2009. The DOE and Treasury have 60 days to process the application once submitted.
DOE Announces $59 million in Conditional Loan Guarantees
On July 2, 2009, the Department of Energy ("DOE") announced $59 million in conditional loan guarantees in the form of $16 million for a wind turbine assembly plant and $43 million for a 20 megawatt flywheel energy storage plant.
Nordic Windpower, USA has been conditionally offered a $16 million loan to support the tooling and commercial-scale set up of its assembly plant in Pocatello, Idaho. This assembly plant produces one megawatt two blade turbines which are 10% less costly to manufacture, install, operate, and maintain than competing systems.
Beacon Power was conditionally offered a $43 million loan to support the construction of a 20 megawatt flywheel energy storage plant in Stephentown, New York. The flywheel system is utilizing a newly developed technology to provide frequency regulation services by absorbing and discharging energy to maintain the consistency of power on the electric grid.
Show me the Money: $350 million in Stimulus Funds Available Now for Geothermal Projects
On May 27, 2009, President Obama announced that the Department of Energy ("DOE") would deploy $350 million from the American Recovery and Reinvestment Act ("Recovery Act") to be used to expand development, deployment, and use of geothermal energy throughout the United States. Four recent DOE Funding Opportunity Announcements ("FOAs") have been issued in conjunction with this announcement. The recently announced Recovery Act funding will support projects in five areas: (1) geothermal demonstration projects, (2) enhanced geothermal systems ("EGS") research and development, (3) innovative exploration techniques, (4) the creation of a national geothermal data system and a resource assessment and classification system, and (5) ground source heat pumps.
For more specific information, see this alert
Show Me the Money: Renewable Energy Financing in the Farm Bill
In an earlier blog, my colleague, Debra Frimerman reported about the Rural Energy for America Program (REAP). REAP provides grants and loan guarantees to agricultural producers and rural small businesses to purchase renewable energy systems, make energy efficiency improvements and conduct feasibility studies for renewable energy systems.
REAP is a program under the Food, Conservation, and Energy Act of 2008 (the "2008 Farm Bill"). The 2008 Farm Bill also includes numerous other programs to help develop renewable energy in rural areas and promote the production of sustainable feedstocks for renewable energy production. Please see this recent alert for specifics.
Washington's American Recovery and Reinvestment Act Comprehensive Application
On May 11, the Washington Department of Community, Trade, and Economic Development (“CTED”) filed an application with the United States Department of Energy to receive American Recovery and Reinvestment Act (“ARRA”) funds for Washington’s State Energy Program (“SEP”). The application contains funding for renewable energy, energy efficiency, and farm energy assessments. Once the SEP is approved, funding will commence through CTED with advice from the Clean Energy Leadership Council.
Energy Efficiency and Renewable Energy Loans and Grants Program
Washington’s SEP dedicates $38.5 million to a loan and grant fund for innovative renewable energy projects that use commercial or near commercial energy technologies. These funds may also be used for cost-effective energy efficiency projects. The goal of this program is to produce renewable energy or reduce energy consumption in a manner which leverages ARRA funds to create or retain as many jobs as possible. The first request for proposal (“RFP”) under this program should be issued in June 2009. CTED anticipates issuing up to 25 loans and 15 grants.
Community-Wide Urban Residential and Commercial Energy Efficiency Program
Washington’s SEP dedicates $14.5 million for the development and deployment of at least three large neighborhood based building energy efficiency projects. This will further the state’s policy goal of annually weatherizing twenty thousand homes and business over the next five years. The Washington State University Extension Energy Program will coordinate and collaborate with CTED on the design, administration, and implementation of the projects.
Energy Efficiency Credit Enhancement
Washington’s SEP provides $5 million toward credit enhancement mechanisms to generate high levels of leverage for energy efficiency projects that go beyond direct loans. CTED will create risk reduction mechanisms that allow financial institutions to lend to a broader pool of applicants with lower rates and longer loan terms. The risk reduction mechanisms include loan guarantees, loan loss reserves, credit enhancements, and leverage revolving loan funds.
The Farm Energy Assessments Program
Washington’s SEP directs $500,000 to increase on-farm energy efficiency. These funds will be used to create tools for farm energy analysis, and to train staff in the use of such tools. Afterwards, farmers will be provided with a tool to analyze current farm practices and proposed changes.
Clean Energy Leadership
Washington’s SEP will be carried with advice from the Clean Energy Leadership Council. The Clean Energy Leadership Council will consist of representatives from Washington’s major clean energy companies, supporting organizations, and the state’s legislature. The council will be co-chaired by the director of CTED. The Council will develop strategic recommendations to develop clean energy industries within Washington, review energy investments, and recommend potential clean energy programs and projects for possible federal funding through the SEP.
Tax and Project Finance Structuring Issues for Renewable Energy Projects
The key ingredient to any successful renewable energy project is financing. A central element related to finance is the maximum use of tax benefits. Please join me and my colleagues as we explore a range of issues that can impact the viability of a project's financing, including: alternative legal structures, general costs and economics, debt vs. equity financing, and efficient use and monetization of tax and other governmental incentives. We will address the impact of the current economy on these matters, including issues relating to availability, pricing, and structure. We will also address the impact on these matters arising from recent changes in tax incentives enacted by Congress in the stimulus legislation.
When: 4/27/2009, 2:30 p.m. - 4:00 p.m. Eastern Time
Where: EUCI Webinar
You can also follow #EUCI for a live Twitter feed of the webinar.
For more information and registration visit:
www.euci.com/web_conferences/0409-re-tax/index.php
