Project Financing

New Community Wind Financing Handbook

The Environmental Law & Policy Center has published an updated version of the Community Wind Financing Handbook. This guide reflects new financing opportunities available from federal energy and economic stimulus legislation, the new Farm Bill, and state incentives.

Community Wind Financing Handbook

Since ELPC published the first edition of the Community Wind Financing Guide in 2004, wind power has become the United States' fastest-growing source of electricity. Community wind projects, which represent a small but growing share of the wind market, are largely owned by farmers and other local investors with a significant economic stake in the project. Such local ownership generates powerful economic and social benefits for rural areas.

The updated Handbook provides the latest information on financing community wind projects, including ownership structures, roles of financial intermediaries, sources of federal and state financial support and consultant/developer directories. Although building these projects has become somewhat easier over time, understanding and accessing financing opportunities remains perhaps the most important requirement for a successful project.

The Handbook can be downloaded at no cost on the ELPC web site from the link below.

Department of Energy Streamlines Loan Guarantee Process for Renewable Energy

U.S. Department of Energy

Washington DC — The U.S. Department of Energy (DOE) has announced it will provide up to $750 million in funding from the American Recovery and Reinvestment Act to help accelerate the development of renewable energy generation projects. This funding will cover the cost of loan guarantees which could support as much as $4 to 8 billion in lending to eligible projects, and the Department will invite private sector participation to accelerate the financing of these renewable energy projects.

The Recovery Act created a new Section 1705 under Title XVII of the Energy Policy Act of 2005 (Title XVII) for the rapid deployment of renewable energy projects and related manufacturing facilities, electric power transmission projects and leading edge biofuels projects that commence construction before September 30, 2011. The new Financial Institution Partnership Program (FIPP) offers a streamlined set of standards designed to accelerate DOE's loan guarantee underwriting process and leverage private sector expertise and capital for the efficient and prudent funding of eligible projects.

This first solicitation under the new program will seek loan guarantee applications for conventional renewable energy generation projects, such as wind, solar, biomass, geothermal and hydropower. Past solicitations for renewable energy generation projects have focused on loan guarantee applications using new or innovative technologies not in general use in the marketplace.

Under this first FIPP solicitation, proposed borrowers and project sponsors do not apply directly to DOE; instead they work with financial institutions satisfying the qualifications of an eligible lender which may apply directly to DOE to access a loan guarantee. The solicitation invites applications from eligible lenders for partial, risk-sharing loan guarantees from DOE.

Read more information on this solicitation and the Department's Loan Guarantee Program at www.lgprogram.energy.gov

Second Round of Clean Energy Awards Announced by Treasury

Washington, D.C. - The U.S. Treasury Department has announced the second round of awards for cash assistance to energy producers in place of tax credits. This provides provides an additional $550 million, bringing the total to more than $1 billion awarded to dateto companies committed to investing in domestic renewable energyproduction.

“This Recovery Act program is an example of a true federal partnership with the private sector,” said Treasury Secretary Tim Geithner. “Not only are our Recovery dollars meeting an immediate funding need among innovative companies, they are also jumpstarting private sector investment in communities across the country, with benefits for the renewable energy industry and our economy alike.” 

Created under Section 1603 of the Recovery Act, the program provides cash assistance to energy producers in place of tax credits. The payments improve project viability, enabling companies to create and retain jobs, and establish sufficient financing bases for projects that may otherwise not be possible, dramatically expanding and accelerating the development of renewable energy projects throughout the country. Under this program, the federal government provides a cash payment in lieu of a tax credit totaling 30 percent of the qualifying cost of the project; for each federal dollar spent in payments, more than two dollars are spent in private sector investments. 

The following 25 projects were funded in this announcement.

STATE

PROJECT

LOCATION

AMOUNT

CA

Bob's Big Boy LLC

Burbank, CA

$53,648

CA

Ameresco Half Moon Bay LLC

Half Moon Bay, CA

$6,641,747

CA

Ameresco Keller Canyon LLC

Pittsburgh, CA

$2,796,377

CA

BioFuel Oasis Cooperative, Inc

Berkely, CA

$16,858

CO

5135 Company

Denver, CO

$23,130

FL

Conditioned Air Corporation of Naples

Naples, FL

$50,250

HI

Two Daughters

Kihei, HI

$15,150

IA

Barton Wind Farm

Kinsett, IA

$93,419,883

MN

BI

Minneapolis, MN

$25,649

MN

Spruce Tree Centre

St. Paul, MN

$107,764

MO

Farmers City Wind Farm

Tarkio, MO

$84,959,857

MO

Ameresco Jefferson City LLC

Jefferson City, MO

$2,300,244

NC

Solar Billboard Property

Bolivia, NC

$5,850

NJ

Meadowlands Exposition Center

Secaucus, NJ

$767,937

NJ

EHT Leasing LLC

Egg Harbor Township

$118,560

NJ

OC Kearny

Kearny, NJ

$992,006

NV

Enel Salt Wells, LLC

Fallon, NV

$21,196,478

NV

Enel Stillwater, LLC

Fallon, NV

$40,324,394

NY

OP 110 E. 59th St. CHP

New York, NY

$415,774

SD

Impervious Energy Systems, LLC

Whitewood, SD

$31,511

TX

Barton Chapel Wind Farm

Jacksboro, TX

$72,573,627

TX

Rio Grande Valley Sugar Growers, Inc.

Santa Rosa, TX

$10,232,261

TX

Bull Creek Wind LLC

O'Donnell, TX

$91,390,497

TX

Pyron Wind Farm, LLC

Roscoe, TX

$121,903,306

VT

Wheeler Brook Apartments

Warren, VT

$19,155

 

 

 

$550,381,913

Loans for Community-Based Wind Projects in Northeastern Minnesota

2009: Duluth, MN - The Arrowhead Regional Development Commission (ARDC) and the Northland Foundation have partnered to provide a revolving loan fund that will provide early-stage project development and feasibility analysis for community-based wind energy projects. The revolving loan fund will be available in Aitkin, Carlton, Cook, Itasca, Koochiching, Lake and St. Louis counties.

The revolving loan fund is part of the Rural Energy Development Initiative (REDI), a state-wide program addressing community-based wind energy development. REDI loan financing is limited to early stage project development and feasibility analysis for wind energy electric generation projects that intend to sell the electricity to an electric utility. Maximum loan size is $25,000 for any one project and/or borrower. ARDC functions as the regional REDI organizer for northeast Minnesota. The Northland Foundation is the acting loan partner for the revolving loan fund. 

For more information regarding the revolving loan fund and/or the application for the loan fund, please see the website or contact Bonnie Hundrieser (ARDC) at 218-529-7527 or bhundrieser@ardc.org

Analysis of Renewable Energy Feed-in Tariffs in the U.S.

The National Renewable Energy Laboratory (NREL) has published a report analyzing the impacts that state level feed-in tariff policies can have on the renewable energy industry across the country. The report uses data and reports from around the world to highlight the various benefits that a feed-in tariff type of policy can have on renewable energy development.

A feed-in tariff is an energy policy that provides for a guarantee of payment to renewable energy developers for the energy that is produced. This type of policy can be thought of as an advanced form of a production-based incentive because payments are made for the actual electricity produced and not for how much capacity is installed. The most common feed-in tariff payment is based on the actual levelized cost of renewable energy generation. This method of payment provides a price adequate to ensure a reasonable rate of return on for investors. 

The authors of the report delve into the various advantages of feed-in tariff policies and the number of challenges to implementing feed-in tariff policies in the U.S. The report also provides a review of the current state-level and utility-level feed-in tariff policies that are currently in place across the county and compares them with the successful models found in Europe. These states include Gainesville, Florida; various Wisconsin utilities; California; Vermont (report was written prior to passage of the state-wide feed-in tariff so this analysis focuses on the two utility-specific programs); Washington; and Oregon. The authors wrap up the report with a discussion of best practices for feed-in tariff policy design and implementation, followed by an analysis on how to use a feed-in tariff policy to achieve state renewable energy goals.

The authors highlight one of the most important elements of a feed-in tariff policy - that it allows for more participants in renewable energy project development. In their analysis the authors state that there are significant impacts of a feed-in tariff on developing community ownership, but it will depend on how the program is structured and payments determined. 

You can read the full report here (PDF).

PTC, ITC or Cash Grant? Which Should a Developer Use?

Lawrence Berkely National Laboratory (LBNL) and the National Renewable Energy Laboratory (NREL) have released a combined report that may help wind project developers understand which federal incentives will be most economical: PTC, ITC, or Cash Grant? An Analysis of the Choice Facing Renewable Power Projects in the United States.

The report takes a close look at key provisions in the recent American Recovery and Reinvestment Act of 2009. These key provisions could have a significant impact on how renewable energy projects are financed in the near future.

Included in these provisions is an extension of the federal production tax credit (PTC). Another provision allows for projects that are eligible for the PTC to elect to receive a 30% investment tax credit (ITC) instead of the PTC. An even more intriguing provisions allows for a project that qualifies for the ITC (or the PTC but elects to receive the ITC) to receive the value of that credit as a cash grant from the Treasury.

The authors analyzed a number of technologies in the report including wind, open- and closed-loop biomass, geothermal and landfill gas projects. The purpose of the analysis is to both quantitatively and qualitatively analyze the choice between the PTC and ITC (or cash grant) from the project developer perspective. Only two technologies showed a clear preference for one incentive over the other: open-loop biomass gets more value from the ITC across the board, while geothermal gets more value from the PTC.

For wind energy, the authors looked at a range of installed costs from $1.500/kW to $2,500/kW and a range of capacity factors from 25% to 45%. They did not include the potential influence on project costs due to nameplate capacity in the presence of economies of scale. These quantitative results showed the PTC provided more value in approximately 2/3 of the cases analyzed.

The authors also looked at qualitative factors that can also influence the decision of which incentive a developer wants to use. These factors include: the option to elect the cash grant; performance risk; tax credit appetite; liquidity; subsidized energy financing; power sale requirement; and the owner/operator requirement. Combining the quantitative and qualitative considerations, the authors found that most wind projects may benefit more from the ITC than they will from the PTC.

As the report concludes, whether a particular project chooses the PTC or ITC or cash grant will depend on any number of factors that will be weighed by each project according to their priorities, and the fact that these choices for federal incentives now exist (temporarily) is a step in the right direction to broaden the participation base in renewable energy.

Click here to download and read the full report (19 pages)
.

Wind Project Financing Structures: A Review & Comparative Analysis

This report from Lawrence Berkley National Laboratory was released in September, 2007. The report, titled "Wind Project Financing Structures: A Review & Comparative Analysis," was authored by John Harper (Birch Tree Capital, LLC), Matt Karcher (Deacon Harbor Financial, L.P.), and Mark Bolinger (Lawrence Berkeley National Laboratory), and was funded by the U.S. Department of Energy's Office of Energy Efficiency and Renewable Energy, Wind & Hydropower Technologies Program.

The rapid expansion in the U.S. wind power industry over the past few years has required the mobilization of a tremendous amount of capital. In 2007 alone, for example, an estimated $6 billion will be invested in new wind projects in the U.S. To attract this kind of capital, the wind power sector has, in recent years, developed multiple financing structures to manage project risk and allocate Federal tax incentives to those entities that can use them most efficiently. These structures are the underlying focus of this report.

Specifically, the purpose of this report is three-fold: (1) to survey recent trends in the financing of utility-scale wind projects in the United States, (2) to describe in some detail the seven principal financing structures through which most utility-scale wind projects (excluding utility-owned projects) have been financed from 1999 to the present, and (3) to help understand the impact of these seven structures on the levelized cost of energy from wind power.

The seven structures -- which range from simple balance-sheet finance to several varieties of all-equity partnership "flip" structures to leveraged structures -- feature varying combinations of equity capital from project developers and third-party tax-oriented investors, and in some cases commercial debt. Their origins stem from variations in the financial capacity and business objectives of wind project developers, coupled with the investment risk tolerance and objectives of the tax-oriented investors and debt providers.

The full report (including an executive summary) can be downloaded from:
http://eetd.lbl.gov/ea/emp/reports/63434.pdf

In addition, a high-level PowerPoint summary of the document is available at:
http://eetd.lbl.gov/ea/emp/reports/63434-ppt.pdf

[Text of this item is adapted with minor changes from from a 09/2007 LBNL press release.]

Webinar: The New Federal Tax Exempt Bonding Bill for Community Energy

The New Federal Tax Exempt Bonding Bill for Community Energy webinar was recorded on June 1, 2007.

The proposed Rural Community Renewable Energy Bonds Act (S. 672), introduced by Sen. Ken Salazar (D-CO) and Sen. Gordon Smith (R-OR), would provide tax exempt private purpose bonds to fund locally owned community energy projects, e.g. those under 40 MW with at least 49% local ownership. If enacted, this bill would give local community energy project developers a better alternative to federal renewable energy production tax credit funding.

To view just the slides from the presentations, click on the links in the list of speakers, below.

Speakers include:

John Covert
Executive Director, Colorado Working Landscapes (Introduction)
Presentation: Introduction

Lisa Daniels
Executive Director, Windustry (Moderator)
Presentation: Financing Locally Owned Wind Projects

Steve Black
Energy Advisor to Senator Salazar

Gregory Johnson
Partner, Patton Boggs, LLP
Presentation: New Financing Opportunities for Renewable Energy

Lee White
Executive Vice-President, George K. Baum & Company
Presentation: Financing Renewable Energy Projects

Andy Olsen
Environmental Law and Policy Center
Presentation: Next Steps

For more information about the Rural Community Renewable Energy Bond Act contact:

Lee White
Renewable Energy Finance Coalition (http://www.refcoalition.com)
303-292-1600
whiteml@gkbaum.com

Webinar Sponsored by:
Renewable Energy Finance Coalition
Environmental Law and Policy Center
Windustry

Pages

Subscribe to Project Financing