090827 Green Stimulus Presentation Final

Document Sample
090827 Green Stimulus Presentation Final Powered By Docstoc
					How green is the stimulus package?
- Renewable Energy Provisions



Cai Steger, Energy Policy Analyst
NRDC Center for Market Innovation




                                    August 27, 2009
Key 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




                                                                                        1
     Capital 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/Need_for_Refundability.pdf                                                                        2
Stimulus 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 RD&D 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/44930.pdf                                                     3
So 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

• Provide for rapid, large-   • Crafting guidelines and staffing up to       • DOE announced
  scale investment in           administer grants and guarantees has           solicitation for $30 billion in
  shovel-ready clean            taken longer than hoped                        loan guarantees on July 29
  energy projects             • Investment has further slowed while          • DOE began taking grants
                                waiting for government guidelines              application on August 1

• Help early stage, higher-   • For emerging technology projects,            • Solicitations announced
  risk projects access          concern that loan guarantees may only          for loan guarantee
  funding                       cover modest portion of capital structure      program should support
                              • Additionally, if there is a bottleneck for     emerging technologies
                                funding, large-scale, capital intensive      • No eligibility limits in
                                projects could receive more attention          grants program

                              • Monetization of depreciation tax benefits    • Improved project
• Overcome existing
                                still a concern                                economics should drive
  financial barriers
                              • Government funding delays (per above)          new investment

                              • Learning curve for new investors             • New grants allow for leasing
• Expand investor pool        • Continued absence of past players              structures (PTC did not)
                                (debt/tax equity)                            • Utilities increasing investment
                              • Some concern over rules regarding tax-       • Enhanced project economics
                                exempt investors in private equity funds       should draw more investors
                                                                                                                 4
Long 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/44930.pdf                                                     5
Cash 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
                                                                                                           6
Loan 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                       7
Additional 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/ClientAlerts/Project+Finance+Client+Alerts+and+Newsletters.htm
   Orrick: http://www.orrick.com/publications/practice_home.asp?practice=Energy+and+Project+Finance&practiceid=13
   Skadden: http://www.skadden.com/Index.cfm?contentID=6&viewType=2#
   Chadbourne: http://www.chadbourne.com/publications/list.aspx?KeywordPhrase=energy&criteriaText=energy
   Van Ness Feldman: http://www.vnf.com/news-area-43.html



                                                                                                                    8

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:4
posted:2/2/2010
language:English
pages:9