The American Recovery and Reinvestment Act should ease pressure on project financing as well as speed up the process of siting schemes on Federal lands in the US

By CSPToday staff writer

The ARRA, signed in February this year, is expected to provide some relief from the broader economic woes being inflicted on the solar industry.

A temporary grant programme will allow commercial solar customers to receive a cash payment to cover 30 per cent of the cost of installing solar equipment. Companies can take advantage of the new grant programme whether or not they have sufficient tax liability to use the full investment tax credit (ITC).

The act also created a fund to guarantee up to $60 billion in loans for renewable energy and transmission projects.

It also provides for DOE loan guarantees and upfront payments of the investment tax credits associated with solar electric generation projects. The DOE and Department of Treasury are in the process of writing the regulations.

“We are closely following these provisions, as are other solar power developers,” said Dan Kabel, president and CEO of Acciona Solar Power Inc, the only developer to complete a large scale CSP project within the last 20 years.

Kabel expects the provisions “to affect the finance-ability of projects”. He added that it was still unclear what the ultimate impact would be as financial institutions re-establish their positions.

Tackling the backlog

Since many CSP projects are being proposed on land, controlled by the Bureau of Land Management (BLM), the siting and permit approval procedures set by the US government have a big impact on the industry.

The Solar Energy Industries Association (SEIA) has highlighted the fact that the number of pending applications for solar development on BLM lands has now grown to more than 200, each of which must be processed individually.

According to the association, the ARRA provides additional funding for the BLM, some of which will be used to speed up the processing of these applications – so the backlog might be shorter than initially feared.

The Department of Energy (DOE) and the Interior Department have already initiated a joint effort to accelerate the processing of solar applications on BLM lands in the south-west. Additionally, the DOE Solar Programme has launched a drive with NREL and Sandia National Laboratories to deliver technology expertise and technical support to BLM Field Offices to handle energy land leases in light of the energy tax and investment provisions in the ARRA.

Long way to go

The industry is clearly not satisfied with the current status.

“So far, it’s been frustrating and somewhat unpredictable,” said Glen Davis, CEO, Agile Energy LLC, referring to the approval procedures.

And despite attempts at rationalisation, getting BLM approval for a project is still a very long process that can extend the development period of a CSP project by over a year compared with a similar one on private land.

“No one could credibly say the process has been streamlined, although the government seems to be trying to move it in that direction,” Davis said.

On the positive side, Acciona’s Kabel cited several bills pending in Congress. These can streamline the process of siting projects on Federal lands, as well as accelerating the transmission siting process.

Banking on incentives

Considering that tax-based policy incentives are not particularly effective when tax burdens are shrinking or non-existent, Congress included several provisions in the ARRA. These are designed to make Federal incentives for renewable power technologies more useful.

One provision allows projects eligible for the production tax credit (PTC) to choose the ITC instead. Another enables ITC-eligible projects (which now include most PTC-eligible renewable power projects) to receive – for a limited time only – an equivalent cash grant in lieu.

It is believed these two provisions could have a significant impact on how renewable power projects are financed over the next few years.

The introduction of the ITC grant option in the stimulus package could be helpful in addressing problems in the tax equity market, Davis said.

“But it remains to be seen if the rules allow the programme to work,” he added.

The industry also believes there is a chance that a Federal renewable energy standard will be passed soon.

Overall, the most important US government policies supporting the solar industry are considered to be the 30 per cent ITC and the five-year modified accelerated cost recovery system (MACRS). This is because they help in addressing the single biggest obstacle to the growth of solar, namely its high cost relative to other power generation sources.

Support for renewable energy

The ARRA includes $6 billion to support loan guarantees for renewable energy and electric transmission technologies. The funds are expected to guarantee more than $60 billion in loans. The act requires the DOE Loan Guarantee Programme to only make loan guarantees to projects that will start construction by September 30, 2011, and this includes renewable energy projects.

Related links: BLM, ARRA, ITC, PTC, DOE, NREL

External link:

NREL report: PTC, ITC, or Cash Grant? An Analysis of the Choice Facing Renewable Power Projects in the United States, March 2009 [http://www.nrel.gov/docs/fy09osti/45359.pdf]

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