US awards $500m in grants to renewables projects

www.environmental-finance.com
3 September

In a quicker than expected turnaround, the US government has awarded more than $500 million in grants to 12 renewable energy projects whose developers chose to receive cash payments rather than tax credits. Iberdrola Renewables was the biggest beneficiary of the first-round awards, receiving five grants totalling $294.9 million for wind energy projects in four states. The grant programme is part of the government's effort to jumpstart renewable energy project development, which has been adversely affected by the credit crunch.

A change in the tax code passed by Congress in February allows biomass, wind and other renewable energy projects that could claim tax credits against energy production to temporarily choose to receive an up-front investment tax credit (ITC) normally reserved for solar projects. As part of the economic stimulus package, the US also allowed project developers who wish to receive cash payments in lieu of the tax credits to apply for a federal government programme that will provide an estimated $3 billion in payments to support $10 billion-14 billion in projects.

The Treasury Department opened the application process on 31 July, pledging to award grants within 60 days of receiving a completed application. But the quick turnaround on the first 12 projects surprised even Treasury and Department of Energy (DOE) officials. "What we're seeing here over the first 30 days is how effectively this is working," said Matt Rogers, senior advisor overseeing DOE investments from the economic stimulus package, based in Washington, DC. "On speed, I think we're doing very well."

The 12 wind and solar projects will provide 840MW of power, representing a 3% increase in total renewable generating capacity in the US, Rogers said. In the first round, the award amounts ranged from $157,809 for a solar PV project at a fitness facility in Colorado to $114.1 million for a windfarm in Texas. The average award was $40 million.

"Switching from the production tax credit to the grant programme was made necessary by the collapse of US financial markets last fall," said Ralph Currey, president and chief executive officer of Iberdrola Renewables, the US arm of the Spanish energy firm. "This change will enable our company and others to keep investing in new renewable energy while the financial markets mend."

Currey expects Treasury to act on three additional grant applications from the company this month. Iberdrola Renewables has a further five wind projects under construction that would also be eligible for the grants. "The Treasury grant programme is serving its intended purposes," Currey said. "The staff at the Treasury Department has implemented the grant programme with speed and care."

In this first round, the government provided more than $500 million of the estimated $3 billion in awards because some of the largest projects completed the application process first. But that $3 billion is a projection not a cap, so the actual dollar amount distributed via the programme could be even higher.

The government expects that many future projects will be closer in total dollar amount to the smallest project in this round. "There is no competition for these payments," said Dan Tangherlini, assistant secretary for management at Treasury in Washington. "All eligible projects will receive financing." While the initial focus has been on wind and solar technologies, the breadth of projects, including geothermal projects, in the pipeline is "attractive", Rogers said. "The diversity of applications in terms of technology, size and geographic mix is something we're quite encouraged by," he added.