Free cash from the feds for clean energy, up front — not enough to cover a whole project, but enough to get investors to pony up more. That’s the basic idea of a new stimulus program that the Department of Energy and the Treasury Department have outlined today and which could potentially provide about $3 billion in grants for some 5,000 projects. Rather than waiting around for a tax credit, clean energy developers can apply for grants for up to 30 percent of their project costs (some technologies like geothermal heat pumps and microturbines will qualify for only up to 10 percent of eligible costs), encouraging investors to finance the remainder.
Congress drafted the general framework of this program, described in official language as “cash assistance in lieu of tax credits,” in the Recovery Act. What’s new today is 20 pages worth of guidelines and a sample application form that project developers can use to figure out if they might qualify for the grants, although the feds won’t start actually accepting applications until next month. The Treasury Department’s Michael Mundaca, Acting Assistant Secretary for Tax Policy, said in a call with reporters today, “We’re trying to get as much information out as quickly as possible.” But according to the Solar Energy Industries Association, a trade group, that hasn’t been quick enough.
“With delays in releasing the Treasury and other guidelines,” SEIA President and CEO Rhone Resch said in a statement about the new program, “we call on Congress to include a one-year extension of the grant program project sunset-date in the energy bill currently being debated so that the program meets the intended goals for jobs and investment.” He also described the new grants as “a critical alternative to the solar investment tax credits extended by Congress in October 2008 that are not functioning as intended because of the current economic climate.”
As it stands now, the Treasury will accept applications for the grants between Aug. 1 and Oct. 1 of this year. According to Mundaca, projects could receive funding within 60 days of submitting a complete application. For projects that get up and running in 2009 or 2010, that could mean 60 days after they submit the first paperwork. But earlier-stage projects — those that haven’t come online yet when the application is filed — will have to go through a longer review process. If the Treasury deems the planned project eligible, then applicants have to submit “supplemental information sufficient for the Treasury to make a final determination” within 90 days after the project goes into service. The agency says it will then take up to 60 days after that to complete a final review and give the yea or nay on funding.
According to Mundaca, the real value of this program comes from more than the cash in hand. “Once the rules are clear, people can move forward with financing these projects,” he said. Matt Rogers, the DOE’s senior adviser for Recovery Act Implementation, added that he expects the program to “bring capital off the sidelines and into these projects.” In other words, if the DOE starts funding a project, private investors will contribute the rest.
Chris O’Brien, chief of market development for Oerlikon Solar, agrees. He tells Solar Industry today, “The collapse of the tax-equity market had certainly been a big factor in slowing market growth in the U.S.” The Treasury’s program he says, “is something we’ve been waiting for…It will be an important catalyst for accelerating the U.S. market.”
Based on the level of participation in the existing production and investment tax credit programs, which these grants are meant to monetize, Mundaca said the government expects to provide about $3 billion in grants for some 5,000 projects. But if there’s more interest, he emphasized that there is not a cap on claims, saying, “Funds will be there to pay out.”
You can find the sample application and full guidelines here on the Treasury’s Recovery Act site.
Photo courtesy Flickr user MountainAsh