Friday, July 10, 2009

$3 Billion For 5,000 Renewable Energy Projects & Guidance

Jul 9: As part of an innovative partnership aimed at increasing economic development in urban and rural areas while setting the nation on the path to energy independence, the U.S. Department of the Treasury and the U.S. Department of Energy announced an estimated $3 billion for the development of renewable energy projects around the country and made available the guidance businesses will need to submit a successful application. Funded through the American Recovery and Reinvestment Act (ARRA, Recovery Act), 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.

Treasury Secretary Tim Geithner said, “The renewable energy program provides another important avenue for the Recovery Act to contribute to economic development in communities around the country. It will provide additional stimulus to economies in urban and rural America by helping to develop domestic sources of clean energy. This partnership between Treasury and Energy will enable both large companies and small businesses to invest in our long-term energy needs, protect our environment and revitalize our nation’s economy.”

The Recovery Act authorized Treasury to make direct payments to companies that create and place in service renewable energy facilities beginning January 1, 2009. Previously, these companies could file for a tax credit to cover a portion of the renewable energy project’s cost; 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.

Department of Energy (DOE) Secretary Steven Chu said, “These payments will help spur major private sector investments in clean energy and create new jobs for America's workers. It is part of our broad effort to double our renewable energy capacity in the next few years and make sure that America leads the world in creating the new clean energy economy of the future.”

In previous years, the tax credit has been widely used. It is considered a successful incentive for encouraging the development of renewable energy. In 2006, approximately $550 million in tax credits were provided to 450 businesses. The rate of new renewable energy installations has fallen since the economic and financial downturns began, as projects had a harder time obtaining financing. The Departments of Treasury and Energy expect a fast acceleration of businesses applying for the energy funds in lieu of the tax credit.

The Treasury Department emphasized that it is not accepting applications for this program at this time. However, to help facilitate the timely flow of program funds to eligible businesses, the Department is publishing several key documents in advance in order to give ample time for businesses to prepare applications and expedite implementation of this program. Three documents are being posted: (1) guidance document; (2) terms and conditions; and (3) sample application form. Treasury notes that a notice, with further instructions, will be posted when it is ready to begin receiving applications via a web-based application designed to further expedite program implementation.

As provided in Section 1603 of the ARRA tax title, funds are provided for payments to persons who place in service specified "energy property" during 2009 or 2010 or after 2010 if construction began on the property during 2009 or 2010 and the property is placed in service by a certain date known as the credit termination date (described more fully below in the Property and Payment Eligibility section). Treasury will make Section 1603 payments to qualified applicants in an amount generally equal to 10% or 30% of the basis of the property, depending on the type of property. Applications will be reviewed and payments made within 60 days from the later of the date of the complete application or the date the property is placed in service. Qualified property includes expansions of an existing property that is qualified property under section 45 or 48 of the IRC.

Specified Energy Property includes: Large Wind; Closed-Loop Biomass Facility; Open-loop Biomass Facility; Geothermal under IRC sec. 45; Landfill Gas Facility; Trash Facility; Qualified Hydropower Facility; Marine & Hydrokinetic; Solar Geothermal under IRC sec. 48; Fuel Cells; Microturbines; Combined Heat & Power; Small Wind; and Geothermal Heat Pumps.

Access a release from DOE and link to the documents (click here). Access further information from the Department of Treasury (click here).