Title: How green is the stimulus package Renewable Energy Provisions Cai Steger, Energy Policy Analyst NRDC
1How green is the stimulus package? - Renewable
Energy Provisions Cai Steger, Energy Policy
AnalystNRDC Center for Market Innovation
August 27, 2009
2Key messages
- Sections of the Stimulus Act (ARRA) related to
renewables were passed to both ease capital
constraints and provide an array of incentives to
drive renewable deployment - So far, early impact of Stimulus on renewables
investment has been more muted than anticipated - Long-term forecast for renewables is still very
promising, with Stimulus provisions expected to
boost deployment significantly - For developers, primary current focus is on cash
grants and loan guarantees programs. Both
programs are launching now, and have a variety of
complex requirements and guidelines
3Capital investment available for renewables has
vanished
- In 2008, tax equity investment and other sources
of financing dried up due to economic downturn,
eliminating primary source of funding for
renewable projects - From 5.4 billion in transaction volume in 2007
among 20 investors, the current tax equity
universe now has only a few investors.
Source Additional Observations About the
Impact of Stimulus Action on Energy and
Environmental Policy Hudson Clean Energy
Partners, L.P, http//www.seia.org/galleries/pdf/N
eed_for_Refundability.pdf
4Stimulus Act should improve access to capital
while providing new incentives to drive renewable
investment and deployment
- Topics of Discussion Today
- Provides 30 cash grants in lieu of renewable
energy tax credits - Expands and improves existing clean energy loan
guarantee program significantly - Additional Provisions in Stimulus that Will
Benefit Renewables (and Efficiency) - Provides PTC-qualified facilities option to elect
the ITC instead of the PTC - Extends the PTC through 2012 for wind, and
through 2013 for other eligible technologies. - Removes subsidized energy financing penalty that
reduced value of ITC - Extends 50 bonus depreciation to qualified
renewable energy projects in 2009. - Removes ITC dollar cap on residential small wind,
solar hot water, and geothermal heat pump and on
commercial small wind. - Adds 1.6 billion in new Clean Renewable Energy
Bonds - Adds 2.4 billion in Energy Conservation Bonds to
state, local, and tribal programs to finance
clean energy projects - Adds 3.1 billion for the State Energy Program
- Adds 4.5 billion for new RDD investment in
efficiency and renewables. - Establishes a 30 ITC for clean tech manufacturing
Source Renewable Energy Project Financing
Impacts of the Financial Crisis and Federal
Legislation http//www.nrel.gov/docs/fy09osti/449
30.pdf
5So far, near-term impact of stimulus measures on
renewables has been muted, but expectations for
the future are still promising
Stimulus Objective
Early Concerns
Future Expectations
- Monetization of depreciation tax benefits still a
concern - Government funding delays (per above)
- Improved project economics should drive new
investment
- Overcome existing financial barriers
6Long term impact of Stimulus is expected to boost
renewables deployment well above current EIA
B.A.U.
Source Renewable Energy Project Financing
Impacts of the Financial Crisis and Federal
Legislation http//www.nrel.gov/docs/fy09osti/449
30.pdf
7Cash grants should provide needed capital and
will be available soon
- Treasury Department Grants in Lieu of Renewable
Energy Credits - Overview
- Allows renewable energy project developers (or
associated parties) to receive a upfront cash
grant of 30 of project costs in place of current
production or investment tax credits. - Designed to mimic the investment tax credit (ITC)
with only a few exceptions. Government expecting
5,000 projects to apply and to distribute 3
billion. - Now accepting applications at http//www.treas.gov
/recovery/1603.shtml. The application is a
fairly simple form, but extensive supporting
documentation will be required - Submission Deadline
- Submission deadline is September 30, 2011.
Different requirements for projects in service,
and projects still under construction before end
of 2010 - Other
- Almost all renewable technologies eligible,
although some qualify only for a 10 grant. - Government and tax-exempt entities cannot access
grants (nor pass-through entities that include
either entity) - Grant must be paid within 60 days of receipt of
application, once project in service. Grants can
be assigned to other entities - Multiple units of production (e.g. wind turbines)
can be treated as a single unit for application
purposes - Recapture possible on multiple occasions,
including if entity sold or disposed to
ineligible entity or if property ceases to qualify
8Loan Guarantee process complicated but should
provide cheaper debt
- Loan Guarantee Program
- Overview
- EPACT 2005 established an loan guarantee program
for innovative GHG-abating projects. For a
number of reasons, no loan guarantees have been
provided until this year. The hoped-for result
of the Stimulus Act is to provide more loan
guarantees at a lower cost for more projects - On July 29, DOE issued 2 new project
solicitations - First supports up to 30 billion in guarantees
for efficiency, renewables and advanced
transmission projects. Renewables, transmissions
or biofuels projects will qualify to have credit
subsidy cost funded by government. Other select
projects can still qualify for loan guarantees
but must pay credit subsidy cost, among other
requirements - Second supports 7.5 - 15 billion in guarantees
for transmission infrastructure - Recent Cash for Clunkers extension has reduced
loan guarantee availability for commercial
technology projects, but this is expected to be
addressed in future - Application Process
- Two parts to application. Part I gives basic
project overview DOE will determine if project
merits further consideration. If so, more
complex Part II application needs to be submitted - Several rounds of applications the deadline for
Part I applications in Round 1 is September 16,
2009. Applications reviewed on a first come,
first serve basis. Additional fees in the
application - Numerous other eligibility requirements related
to technology, GHG-abatement, equity contribution - Evaluation criteria for both solicitations will
include credit worthiness, construction plan,
legal/regulatory risk, technical attributes,
environmental benefits - Interest rate is expected to be low 25 to 50
bps above comparable US Treasuries
9Additional Information Sources
- NREL/LBNL
- Renewable Energy Project Financing Impacts of
the Financial Crisis and Federal Legislation
http//www.nrel.gov/docs/fy09osti/44930.pdf - PTC, ITC, or Cash Grant? An Analysis of the
Choice Facing Renewable Power Projects in the
United States, http//www.nrel.gov/docs/fy09osti/
45359.pdf - Government Websites
- Loan Guarantees - http//www.lgprogram.energy.gov/
- Grants - http//www.treas.gov/recovery/1603.shtml
- Stimulus - http//www.treas.gov/recovery/
- Law Firms
- Milbank http//www.milbank.com/en/NewsEvents/Clie
ntAlerts/ProjectFinanceClientAlertsandNewslet
ters.htm - Orrick http//www.orrick.com/publications/practic
e_home.asp?practiceEnergyandProjectFinancepra
cticeid13 - Skadden http//www.skadden.com/Index.cfm?contentI
D6viewType2 - Chadbourne http//www.chadbourne.com/publications
/list.aspx?KeywordPhraseenergycriteriaTextenerg
y - Van Ness Feldman http//www.vnf.com/news-area-43.
html