Federal Policy Descriptions

  • Clean Renewable Energy Bonds (CREBs)

    The Clean Renewable Energy Bond (CREB) program is a new financial incentive created in the Energy Policy Act of 2005. It is available to municipal utilities and electric cooperatives and is intended to promote renewable energy development.


    The Federal Production Tax Credit (PTC) has been the dominant mode of financing for renewable energy projects since it was made available in the early 1990s. The PTC, however, was designed to benefit the large investor-owned utilities and to track their capital into the renewable energy marketplace. Electric cooperatives and government entities like public power systems and municipal utilities have never been eligible for the PTC. In order to get into the marketplace, they successfully lobbied Congress in 2005 for the creation of CREBs, which is a tax credit bond available only to them. The program was modeled after the Qualified Zone Academy Bond (QZAB) program enacted in 1998 to provide tax incentives for the rehabilitation of public school buildings.

    Program Details

    CREBs are tax credit bonds with an interest-free finance rate. The entire interest on the bond is paid by the U.S. Treasury in the form of a tax credit. $800 million have been allocated by the Secretary of the Treasury to the program for the time period between January 1, 2006 and December 31, 2007. $300 million of that has been designated for rural electric cooperatives. The borrower has five years to spend 95% of the proceeds. The tax credit rate is posted daily by the U.S. Treasury. The discount rate is designed to provide for the maximum term equal to produce 50% of the face amount of the bond (approximately 11 years).

    Who Can Issue CREBs?

    • State and local governments
    • District of Columbia
    • CoBank, ACB
    • Mutual or cooperative electric companies
    • U.S. territories and possessions
    • Native American tribal governments
    • National Rural Utilities Cooperative Finance Corporation
    • A not-for-profit electric utility that has received a loan or loan guarantee under the Rural Electrification Act

    Who Can Borrow CREB Proceeds?

    • A mutual or cooperative electric company
    • A governmental body

    Allocation of CREBs

    Applications for CREBs were due April 26, 2006. The Secretary of the Treasury will allocate CREBs starting with the smallest project and proceeding through the larger projects until the entire $800 million has been allocated.

    For More Information

  • Depreciation

    Double-declining balance, five-year depreciation schedule (I.R.C. Subtitle A, Ch. 1, Subch. B, Part VI, Sec. 168 (1994) (accelerated cost recovery system)) is another federal policy that encourages wind development by allowing the cost of wind equipment to be depreciated faster.

  • Federal Production Tax Credit

    The Wind Energy Production Tax Credit (PTC), is a per kilowatt-hour tax credit for wind-generated electricity. Available during the first 10 years of operation, it provides 1.5 cents per kWh credit adjusted annually for inflation. The adjusted credit amount for 2005 is 1.9 cents per kWh. Enacted as part of the Energy Policy Act of 1992, the credit has gone through several cycles of expiration and renewal. The inconsistent nature of this tax credit has been a significant challenge for the wind industry, creating uncertainty for long term planning and preventing steady market development. In July 2005, the PTC was "seamlessly" renewed for the first time when an extension through December 31, 2007 was included in the federal Energy Bill. The PTC was extended again in December 2006, and will now expire December 31, 2008.

    Read more about the PTC on the American Wind Energy Association web site.

    The tax credit also is primarily useful for corporations and is difficult (but, not impossible) for other entities (farmers and individuals, schools, municipal utilities, etc.) to use effectively.

    Many community wind projects find ways to use the production tax credit, but it can be a challenge. The federal Renewable Energy Production Incentive supported many municipal and school projects, but is not available for new projects. There have been a number of proposals to make the PTC more accessible for community projects and other alternatives.

    Why is the PTC difficult for farmers and other average individuals to use?

    Adapted from the Government Accountability Office's September 2004 report, Wind Power's Contribution to Electric Power Generation and Impact on Farms and Rural Communities:

    According to Department of Treasury officials, for a farmer who does not materially participate in a wind power project to make use of the production tax credit, the farmer must have tax liability attributable to passive income (e.g., rental income or income from businesses in which the farmer participates only as an investor) against which to claim the production tax credit.* Passive income does not include income from the farmer's active farming business, wage income, or interest and dividend income. Unless a farmer materially participates in the production of wind power, the production tax credit cannot offset tax liability attributable to income from these sources. Since many farmers do not have passive income and do not materially participate in wind power production, this passive versus nonpassive income distinction limits the number of farmers that are able to take advantage of the renewable energy production tax credit.

    *Internal Revenue Service Publication 925 defines criteria for material participation in a trade or business activity. For example, an individual materially participates in a trade or business activity if the individual participates more than 500 hours during the tax year.


  • Introduction to Feed-in Tariffs

    The phrase “feed-in tariff” has recently entered the daily dialogue of not only renewable energy advocates, but policy makers as well. A feed-in tariffs is a policy mechanism that provides a renewable energy facility with a guarantee of interconnection to the electrical grid and a set price paid for that renewable energy. Feed-in tariffs are proven to be the most successful policy for the rapid development of significant amounts of renewable energy world-wide, and have experienced increasing attention in North America over the last year. Feed-in tariffs work because they are more equitable than other policies. They enable everyone - including homeowners, farmers, cooperatives, and businesses large and small - to profit from renewable energy.


    Once a feed-in tariff is implemented, utilities are required to purchase the electricity produced from a qualified renewable energy facility at a set price, or tariff, per kilowatt-hour generated. The cost of purchasing this energy is paid for by the utility and energy consumer, just like any other electricity generation source, and not with government incentives paid for by taxpayers who may not be using the energy. To ensure the tariff rate is successful, it should be set at a level that allows recovery of the cost of the facility plus a return on the investment. This is similar to how regulations of utility rates happen in many parts of the country and is a familiar concept for the industry. A feed-in tariff is separate from net-metering because the electricity generated is not used on-site. All of the output from the facility is purchased by the utility and the facility owner continues to pull electricity from the grid as before.


    This type of policy has had notable success in Europe, particularly in Germany where as of 2008, over 75 percent of the electricity generated from renewable sources was purchased according to the tariffs under the Renewable Energy Sources Act (EEG), Germany’s feed-in tariff. The additional costs associated with this program for 2008 accounted for an additional 1.05cent/kWh. An average German household had an increase of 3.10 euro in their monthly electricity bill as a result of the feed-in tariff. The German Ministry for the Environment, Natural Conservation and Nuclear Safety issues an annual report on the status of renewable energy in Germany that analyzes these figures. You can read the 2008 preliminary report here.



    In North America this type of policy has been slow to gain support despite efforts on both the federal and state levels. However, the past year has witnessed major strides in implementing feed-in tariff policies. According to the Alliance for Renewable Energy, there are 20 states that have considered feed-in tariff style policies. Below are some highlights from a few of these efforts: California’s Start; The Gainesville Story; Vermont Joins In; The Canadian Perspective. 


    California’s Start

    In early 2008 the California Public Utilities Commission announced the availability of two expansions of a tariff designed to support and encourage the development of up to 480MW of renewable energy from small generating facilities throughout the state. This program is targeted specifically to the publicly owned water and wastewater treatment facilities.

    The key elements of the tariff are:


    A fixed price, non-negotiable contract for 10, 15, or 20 years


    A project size cap of 1.5MW


    According to the order establishing this tariff, an eligible facility is one that is defined in PUC code § 399.12 which requires the facility to meet the definition of § 25741 of that code. The definition includes wind facilities that are located within the state of California and generally requires the first point of interconnection to be within the state.


    Any customer may sell to Edison or PG&E


    Only water and waste water customers may sell to the other four utilities: San Diego Gas and Electric Company, PacifiCorp, Sierra Pacific Power Company, Bear Valley Electric Service Division of Golden State Water Company, and Mountain Utilities


    The tariff rate is determined by the following formula:


    Price paid in $/kWh = (kWh of energy distributed onto the grid at a certain time) * (the baseload market price reference fixed at time of actual commercial operation) * (the time of delivery adjustment)


    More information on these factors can be found in the order establishing the tariff from the CA PUC 

    Electricity purchased by the utility under this tariff may be used to satisfy the state renewable energy standards.


  • New Market Tax Credits

    The New Markets Tax Credit Program (NMTC) provides a credit against Federal income taxes in exchange for making qualified equity investments in designated Community Development Entities (CDEs). All of these investments must in turn be used by the CDE to provide loans or equity investments for designated projects in lower-income communities. The credits are provided to the CDE and passed through to investors based on their proportionate investment in the CDE. The credits are equal to 39 percent of the funds invested and are claimed over a seven-year credit allowance period. In each of the first three years, the investor receives a credit equal to five percent of the total amount paid for the stock or capital interest at the time of purchase. For the final four years, the value of the credit is six percent annually. Investors may not redeem their investments in CDEs prior to the conclusion of the seven-year period.

    CDE’s apply for an allocation during the annual allocation period (July-September). The CDE does not have to identify specific projects or have a committed source of capital to fund those projects. To date, the Fund has made 170 awards totaling $8 billion in allocation authority.

    A designated community must meet certain low-income characteristics. Eligible communities include low-income rural counties with high out-migration. An organization wishing to receive awards under the NMTC Program must be certified as a CDE by the Fund.

    Once a CDE is awarded a NMTC allocation, it solicits projects consistent with its targeted investments. At the same time, it attracts private capital to invest in the CDE. The CDE then makes equity investments in or lends to the designated projects. Lending terms are usually better than what may be offered by commercial lenders. The outside investors receive tax credits and, depending on the structure of the transaction, either interest payments from or an equity stake in the projects.

    To qualify as a CDE, an organization must:

    • be a domestic corporation or partnership at the time of the certification application;
    • demonstrate a primary a mission of serving or providing investment capital for low-income communities or low-income persons; and
    • maintain accountability to residents of low-income communities through representation on a governing board of or advisory board to the entity.

    Wind Applicability
    In 2006, three Midwestern and one Gulf Coast CDEs were awarded NMTC allocations to provide debt and equity for rural businesses involved in value-added agricultural activities including renewable energy. These were:

    Midwest Minnesota Community Development Corporation, Detroit Lakes, MN
    $80 million allocation
    Projects in Minnesota

    Dakotas America, LLC, Sioux Falls, SD
    $50 million allocation
    Projects in North and South Dakota

    American Community Renewable Energy Fund, LLC, New Orleans, LA
    $42 million allocation
    Projects in the Gulf Coast

    Potential developers of community wind or other renewable energy projects in the targeted geographic investment areas of the four CDE entities listed above can contact them to discuss financing considerations.

    Combining NMTCs with the PTC
    According to tax counsel at the law firm Nixon Peabody LLP, a renewable energy project that is eligible for Section 45 tax credits can utilize both NMTCs and the production tax credits from the project. Unlike other grant or subsidized loan programs, there would be no reduction in the available production tax credits from the project. If the CDE is providing debt to the project, then the investors in the CDE can claim the NMTCs while equity investors in the project can claim the PTCs. If the CDE is providing equity support to the project (less typical these days because the Treasury strongly favors CDEs that aren’t “related” to the businesses they invest in), then the investors in the CDE can claim both the NMTCs and their proportionate share of the PTCs. Note that for a typical wind project ($1,500/kW, 35% capacity factor), the New Markets Tax Credit has roughly the same value as the PTC.

    For More Information

  • Public Utilities Regulatory Policy Act of 1978 (PURPA)

    The Public Utilities Regulatory Policy Act of 1978 (PURPA) was enacted as part of the National Energy Act of 1978, during a time of unprecedented energy supply instability in the United States. The law requires utilities to purchase energy from non-utility generators or small renewable energy producers that can produce electricity for less than what it would have cost for the utility to generate the power, or the "avoided cost." Although once considered a key incentive for renewable energy, PURPA is less helpful for renewables today due to lower fossil energy prices.

    Read background information on PURPA on the Union of Concerned Scientists web site.

  • Renewable Energy Production Incentive (REPI) - National

    The Renewable Energy Production Incentive (REPI) provides financial incentive payments for electricity produced and sold by new qualifying renewable energy (including wind) generation facilities. Eligible electric production facilities are those owned by state and local government entities (such as municipal utilities) and not-for-profit electric cooperatives. Qualifying facilities are eligible for annual incentive payments of 1.5 cents per kilowatt-hour for the first ten-year period of their operation. This incentive is not considered bankable since it must be appropriated each year by Congress. This incentive expired September 30, 2003 but was reauthorized for 2006-2026 by the Energy Policy Act of 2005.

    Read more about the REPI on the Database of State Incentives for Renewables and Efficiency website.

  • USDA Farm Bill

    2008 USDA Farm Bill

    On May 22, 2008, Congress overrode the President's veto of the Food, Conservation, and Energy Act of 2008 (the "Farm Bill"). The Farm Bill is an investment in our nation's food and farm economy. It will ensure food security and promote healthier foods and local food networks, strengthen international food aid and reform commodity and farm programs, protect our natural resources and promote homegrown renewable energy.

    The Farm Bill has historically addressed not only farm regulations, but also food security and protection of environmental resources. As our country seeks to reduce its dependence on foreign oil, our ranchers and farmers will continue to be vital players in the development and growth of renewable energy resources. Biofuels, wind energy, solar power and ethanol production are all addressed in the new Farm Bill 2008.

    There are a total of 14 titles in the Farm Bill ranging from commodity programs to research to energy to insurance to nutrition. Renewable energy, specifically wind generated energy, is mainly addressed by 4 titles: Conservation, Rural Development, Research, and Energy.

    Similar to the previous Value-Added Produce Grants and 9006 Programs, the 2008 Farm Bill will offer both grants and guaranteed loans for eligible projects under the Renewable Energy for America Program, or REAP. The USDA Rural Development website has information on applying and guidance documents for applications.

    As a result of the delay in passing the 2008 Farm Bill, Congress has extended many of the programs from the 2002 Farm Bill including the Section 9006 Renewable Energy and Energy Efficiency Improvement Program. On March 6, 2008 the USDA annouced the availability of funding for these programs under Section 9006. The deadline for applications is June 16, 2008. The 9006 Forms for applications can be found here.

    For the most up-to-date application information, contact your state Rural Energy Coordinator. Check back here for updates as they are announced and stay tuned to the USDA site for more information. Also, please see the attached "Farm Bill FAQ" pdf file.

    Useful Resources for 2002 Farm Bill

    Value-Added Producer Grant Program

    Section 9006 Energy Title Grant Program:

    "An American Success Story" (ELPC)

    USDA Websites:

    Farm Bill Section 9006

    Value-Added Producer Grants

    Previous Section 9006 Award Winners

    2008 Award Winners and USDA 2008 Press Release

    2007 Award Winners and USDA 2007 Press Release

    2006 Award Winners and USDA 2006 Press Release

    2005 Award Winners and USDA 2005 Press Release

    2004 Award Winners and USDA 2004 Press Release

    2003 Award Winners and USDA 2003 Press Release


    More Information and Links

    For more information about energy provisions in the Farm Bill:

    --Environmental and Energy Study Institute- Energy and Agriculture Program
    --Database of Renewable Energy Incentives- Renewable Energy Systems and Energy Efficiency Improvements Program summary
    --North Dakota SEED- Farm Bill Energy Title resources
    --Iowa Rural Development - Farm Bill

  • Value Added Producer Grant Program

    The Value-Added Producer Grant (VAPG) program was first established in the Agriculture Risk Protection Act of 2000 and was later amended in the 2002 Farm Bill. Grant funds are available for planning activities and working capital for marketing value-added agricultural products and for farm-based energy. Independent producers, farmer and rancher cooperatives, agricultural producer groups, and majority-controlled producer-based business ventures are eligible.

    The USDA website includes information about past winners, the application process, a full program guide, and links to the required federal forms:

    The Rural Business-Cooperative Service (RBS) announced the availability of approximately $19.3 million in competitive grant funds for fiscal year (FY) 2007 to help independent agricultural producers enter into value-added activities. Awards may be made for planning activities or for working capital expenses, but not for both. The maximum grant amount for a planning grant is $100,000 and the maximum grant amount for a working capital grant is $300,000.Paper copies must be postmarked and mailed, shipped, or sent overnight no later than May 16, 2007, to be eligible for FY 2007 grant funding. Electronic copies must be received by May 16, 2007 to be eligible for FY 2007 grant funding.

    Value Added Produce Grants website
    Contact your State Rural Development Office for details.

    Previous VAPG Recipients for Wind Energy Projects


    Wray Farmer-Owned Wind Farm Group, Colorado: $128,000
    Grant funds will be used to conduct a feasibility study and to develop a business plan for a farmer-owned commercial wind energy project in Wray, CO.


    Iowa Floyd County Wind: $7,312
    Purpose: This is a 6 member producer group using Value-added Producer Grants funds to investigate the potential of electrical wind generation in Floyd County, IA.

    Iowa Farm Energy, LLC: $7,500
    Purpose: Farm Energy, LLC requested grant funds to assist in determining the feasibility and business planning of a small scale producer owned wind farm in Northwest Iowa.

    Idaho West Slope Farms, Inc: $20,250
    Purpose: To determine the feasibility of installing on-farm wind turbines.

    Oregon Summit Ridge Group: $85,900
    Provided a positive outcome of the feasibility study, the project will create a new business to coordinate and finance the development, construction and operation of on-farm wind turbines, resulting in the sale of electricity.


    Harvest Land Cooperative, Morgan, Minnesota: $148,000
    Purpose: To assist in the development of on-farm renewable energy generation using wind.

    Last Mile Electric Cooperative, Olympia, Washington: $150,000
    Purpose: To assess the feasibility of installing small scale wind turbines on farms in the Pacific Northwest.

    More Information on VAPG

    Program Website

    Program Regulation

    Past award winners 2003

    Past award winners 2002

    Past award winners 2001