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.
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
- The Environmental Law and Policy Center (ELPC) has a detailed summary of the CREB program
- The conference proceedings from Windustry’s March 2006 Community Wind Energy Conference have more information on CREBs.