American Recovery and Reinvestment Act
Recovery and Reinvestment Act
Now that Congress has passed and President Obama has signed the American Recovery and Reinvestment Act of 2009, how will this help to stimulate Community Wind projects? According to Denise Bode, American Wind Energy Association CEO, "the stimulus bill contains a number of provisions aimed at helping our industry continue the very strong growth in new installations and new jobs we have seen over the past few years." Some of the provisions include:
- 3-year extension of the federal wind energy production tax credit (PTC)
- Option for a 30% investment tax credit (ITC) instead of the PTC
- Option to convert the ITC into a grant for projects placed in service before 2013
- Additional loan guarantees, bonds, and tax incentives
President Obama's goal with the stimulus package is to create a wide variety of initiatives to jumpstart the American economy. This opens up new sources of funding for renewable energy at a time when the Wind Energy industry is set for even more growth despite being stalled by the economic downturn. These programs will allow Community Wind projects to take advantage of more funding opportunities.
— President Barack Obama
Presidential Address to Congress
February 24, 2009
Wind facilities that qualify for the PTC can now make an irrevocable decision to take a 30% ITC in lieu of the PTC. In order to do so the project must be placed into service by December 31, 2012, and the PTC will no longer be available for the project. This has the potential to attract more investors who may not have enough passive activity income to realize the PTC. Which credit a taxpayer uses will depend upon an analysis of the project revenue and cost projections as well as analysis of the investor tax appetite.
Further, if the project qualifies for the PTC or the ITC and is placed into service between 2009-2010 (or it begins construction at that time and is placed into service before 2013) the project can choose to apply to the Treasury Department for a cash grant that is equal to 30% of the qualified costs of the project. This cash grant is in lieu of both the PTC and ITC. This means the value of the ITC can be realized, even if the taxpayer cannot take advantage of the credit. The rules and application guidelines for this program have not been finalized yet.
There are other provisions that address renewable energy financing on other levels. The Act removes the $4,000 cap on the small wind credit so taxpayers can now take the full 30% credit for a qualified small wind system.
The Act also provides for an additional $1.6 billion for Clean Renewable Energy Bonds (CREBs) that are used to finance renewable energy. There have been no announcements yet that applications are being accepted for these new allocations, and no guidance has been given on how the program will operate. Previously, these bonds have been given at 0% interest rate, and the bondholder receives a tax credit in lieu of bond interest.
The Department of Energy received an extension of their authority to provide loan guarantees for qualified technologies under Title XVII of the federal Energy Policy Act of 2005 and an additional $6 billion for this program. Eligible technologies include electricity-generating renewable energy projects.
Read more on the American Recovery and Reinvestment Act of 2009 Wind Energy Provisions at the Fredrikson & Byron P.A. web site and read how The Geniuses at DSIRE Translate the Energy Parts of the Stimulus Package via the Interstate Renewable Energy Council web site.
Along with this important step forward to make wind power and other renewables a catalyst for America’s economic recovery, the American Wind Energy Association has launched an effort to enact a national renewable electricity standard (RES) and to make progress toward construction of the Green Power Superhighway, a new transmission system needed to fully develop America’s immense wind resources. Read more about the AWEA New Wind Agenda.