In addition to tax incentives, the Federal government offers several grant or incentive programs to support wind power.
Federal Government Loan Guarantee Program
The 2009 American Reinvestment and Recovery Act (ARRA) creates a new $6 billion dollar loan guarantee program ($4 billion for renewable energy and $2 billion for transmission). Loan guarantees are available to projects which commence construction by September 30, 2011.
Under existing regulations, the Department of Energy may guarantee up to 100 percent of a loan, provided that the loan is issued by the Treasury Department's Federal Financing Bank. Loans from private lenders can also be guaranteed, provided that the guarantee is for less than 100 percent of the loan amount. In the competitive evaluation process, greater weight will likely be given to applications that rely upon a smaller guarantee percentage.
In 2006 the U.S. Treasury, through the Internal Revenue Service (IRS), conducted a competitive process for the allocation of the first $800 million (face value) of Clean Renewable Energy Bonds (CREBs). Modeled after the Qualified Zone Academy Bonds, Clean Renewable Energy Bonds offer the issuer the equivalent of zero-interest financing. The federal government provides a tax credit to bond holders in lieu of interest payments.
In 2008, the Energy Improvement and Extension Act allocated $800 million to this popular new program. The American Reinvestment and Recovery Act further expanded the Clean Renewable Energy Bonds program with an additional $1.6 billion allocation — bringing the total available funding to $2.4 billion for new awards. Funding will be awarded evenly to public power, government bodies, and cooperatives (one-third each).
Under the new Clean Renewable Energy Bonds program, the bond maturity period is expected to be between 12 and 13 years (as opposed to the 15 to 16 year period under the 2006 program). In another significant departure from the old Clean Renewable Energy Bonds program rules, bond repayment is due in one lump sum at the bond's maturity date, as opposed to equal annual principal payments. Like the old program, qualifying Clean Renewable Energy Bonds applications are awarded funds from smallest to largest dollar request until the IRS's funding allocation is exhausted. Due to the large number of requests in earlier rounds, applicants participating in the current round are encouraged to use Clean Renewable Energy Bonds as a supplement in their financing, as opposed to 100% — or even a majority — of project debt.
Clean Renewable Energy Bonds Awards
In the first round, the IRS received 786 applications from 40 states, totaling $2.5 billion in requested funds (compared to $800 million allocated). Six hundred and ten projects were approved. Of those, 532 were for state, regional, and local government-sponsored renewable energy projects (with individual awards ranging from $23 thousand to $3.2 million) and 78 were for cooperative-sponsored projects (with individual awards ranging from ($120 thousand to $31 million). Wind received 112 awards in total, including 99 government projects and 13 cooperative projects. Examples of entities receiving Clean Renewable Energy Bonds allocations for proposed New England wind projects include: the Narragansett Bay Commission and the Town of Portsmouth in Rhode Island, and the New Hampshire Electric Cooperative.
More Information
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The Renewable Energy Production Incentive (REPI) is a cash production incentive intended to provide similar incentives to renewable projects as provided by the Production Tax Credit (PTC) to public power and other tax-exempt entities unable to take advantage of the PTC. As part of the Energy Policy Act of 2005, REPI was reauthorized through 2026. To be eligible, qualified renewable energy facilities must be on-line before October 1, 2016. EPAct 2005 also expands eligibility to include Indian tribes. Funding is subject to annual appropriation. In years where there is a shortfall in funding, the 2005 EPAct allocates 60% of REPI funds to solar, wind, ocean, geothermal, or closed-loop biomass technologies and the remainder to landfill gas, livestock methane, and open-loop biomass. All projects are eligible to receive incentives for electricity generated during a ten-year period beginning from commercial operation.
Under Section 9006 of the 2002 Farm Bill, the U.S. Department of Agriculture makes direct loans, loan guarantees, and grants to agricultural producers and rural small businesses to purchase renewable energy systems and make energy-efficiency improvements. For more information, please see the U.S. Department of Agriculture Farm Bill Web site.
DOE's Office of Energy Efficiency and Renewable Energy's Tribal Energy Program provides financial and technical assistance to tribes for feasibility studies and shares the cost of implementing sustainable renewable energy installations on tribal lands. For more information, please see the Tribal Energy Program Web site.
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