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Opportunity in Economic Crisis e-Alert
March 23, 2009

Resources


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Solar Power Incentives

American Recovery and Reinvestment Act of 2009

By:  Michael Nasi, Sue Snyder, and Travis Wussow

On February 17, 2009, President Obama signed into law a $787 billion stimulus package designed to jump-start the U.S. economy. The American Recovery and Reinvestment Act of 2009 (Recovery Act) included $43 billion for energy-related programs. A significant portion of this energy funding is available for solar energy technology development and deployment. These new funding and incentive programs will be administered on a competitive basis—businesses need to act quickly to position themselves to receive funding authorized by the Recovery Act.

The Department of Energy (DOE) has launched a website that contains information on the DOE's programs launched under the Recovery Act. CLICK HERE to view it.

DOE Renewable Energy Programs—$2.5 billion

The Recovery Act provides $2.5 billion in funding for existing DOE programs, which include the Solar Energy Program, the Wind and Hydropower Program, and the Geothermal Energy Program.1 The details of how the funding will be appropriated have not yet been released. However, the DOE has signaled that it has been working to simplify existing programs and plans to administer this $2.5 billion appropriation through these streamlined versions of existing programs. For more information about DOE's Solar Energy Technologies Program, CLICK HERE.

Innovative Technology Loan Guarantee Program—$6 billion

The Recovery Act created the Innovative Technology Loan Guarantee Program, a new, temporary loan guarantee program to be administered by the DOE. The Recovery Act authorized the DOE to distribute $6 billion in loan guarantees through this program.

Three types of projects are eligible: (1) renewable energy systems; (2) electric power transmission systems; and (3) leading edge biofuels projects currently performing at the pilot or demonstration scale.

The Recovery Act directs the Department of Energy to consider several factors in making loan guarantees, including (1) viability of project without guarantees; (2) availability of other federal and state incentives; (3) importance of the project in meeting reliability needs; and (4) effect of the project in meeting a state or region's environment (including climate change) and energy goals.2

The DOE has not yet released the details of how the Program will be structured, but DOE Secretary Steven Chu has stated that the Department is working hard to develop the guidelines for the program and hopes to make the first round of loan guarantees available by late April or early May. Secretary Chu has stated that the loan guarantee application has been shortened from around 1,000 pages to around 50 pages in order to expedite the process.

Under past programs, the DOE has only guaranteed loans where there is a reasonable likelihood that the borrower will be able to repay the principal and the interest on the loan. Additionally, the DOE has required in the past that the loan guarantee not exceed 80% of the total project cost.

For more information on the Loan Guarantee Program, CLICK HERE.

Tax Incentives

  • Extension of Renewable Electricity Production Credit
    Section 45 of the Internal Revenue Code provides a tax credit for the sale of electricity produced from a qualifying renewable electricity facility that uses certain renewable resources, including wind, closed-loop biomass, open-loop biomass, geothermal, solar, small irrigation power, municipal solid waste, qualified hydropower, and marine and hydrokinetic renewable energy. The Recovery Act extends this credit to apply to facilities placed in service until 2012 for wind and 2013 for all other renewable energy facilities.3
  • Election of Investment Credit Instead of Production Credit
    The Recovery Act amends § 48 of the Internal Revenue Code to allow producers of renewable electricity that would qualify for a production credit under Section 45 to instead irrevocably elect an investment credit of 30% of the cost of the energy property. This credit is available for wind, closed-loop biomass, open-loop biomass, geothermal, solar, landfill gas, trash, hydropower, or marine/hydrokinetic facilities placed in service after December 31, 2008.4
  • Grants for Specified Energy Property Instead of Tax Credits
    The Recovery Act provides that persons eligible for the renewable electricity production credit or the renewable electricity investment credit may instead elect to receive a grant for property placed in service during 2009 or 2010. This provides incentives for taxpayers who cannot take advantage of tax credits to invest in renewable energy property. The Recovery Act provides that the grants will be made available within 60 days of the application for the grant.5

Electricity Delivery and Energy Reliability Funding—$4.5 billion

The Recovery Act provides $4.5 billion in funding for electricity delivery and energy reliability programs authorized by Title XIII of the Energy Independence and Security Act of 2007.6 The DOE has already developed programs for funding "smart grid" projects; the Recovery Act provides additional funding for these programs.

For information about the DOE's ongoing Smart Grid Program, CLICK HERE.

Cost-Sharing Requirements

The Energy Policy Act (EPAct) of 2005 created several cost-sharing requirements that apply to all funding administered by the DOE after the effective date of the EPAct. The portion of cost-sharing required by the EPAct depends on the activity being carried out by the recipient of the federal funding:

  • Research and development
    Recipients of DOE funding must supply at least 20% of the funding for the project from non-federal sources. The statute provides an exclusion for development activities that are of a "basic or fundamental nature," and the non-federal percentage requirement may be reduced if the Secretary of Energy determines that the reduction is "necessary and appropriate."
  • Demonstration and commercial application
    Recipients of DOE funding for demonstration or commercial applications must supply at least 50% of the funding for the project from non-federal sources. This percentage may be reduced if the Secretary of Energy determines that the reduction is "necessary and appropriate."7

If you have any questions regarding the content in this e-Alert, please contact:

Michael Nasimnasi@jw.com

Sue Snyderssnyder@jw.com

Travis Wussowtwussow@jw.com

Stephanie Chandlerschandler@jw.com

Megan Quinnmquinn@jw.com


1 American Recovery and Reinvestment Act of 2009, Pub. L. 111-5, Title IV.
2

American Recovery and Reinvestment Act of 2009 § 406, sec. 1705.

3

American Recovery and Reinvestment Tax Act of 2009 § 1101 (to be codified at 26 U.S.C. § 45).

4

American Recovery and Reinvestment Tax Act of 2009 § 1102 (to be codified at 26 U.S.C. § 48).

5

American Recovery and Reinvestment Tax Act of 2009 § 1603.

6

American Recovery and Reinvestment Act of 2009, Title IV.

7

Energy Policy Act of 2005, Pub. L. 109-58, § 988, 119 Stat. 594, 91011 (codified at 42 U.S.C. § 16352 (Supp. V 2006)).


Jackson Walker is excited to announce its Opportunity in Economic Crisis Task Force, which provides coordinated and comprehensive support and advice to clients with regard to opportunities contained in the American Recovery and Reinvestment Act of 2009. Please CLICK HERE to learn more about the experience Jackson Walker can bring to bear in this area and CLICK HERE to go directly to other e-Alerts on this subject.


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