Copenhagen and The Outlook for Renewables

December 17, 2009

From Copenhagen: Renewable Energy Gets Boost as Climate Talks Stall

by Lauren Poole, Correspondent

Copenhagen, Denmark [RenewableEnergyWorld.com]

Photo Credit: Warren Gretz

In the midst of a turbulent week of demonstrations outside the Climate summit in Copenhagen, in which the police released teargas and arrested hundreds of people, the U.S. announced new initiatives and legislation that will give renewable energy a significant boost at home and in developing countries.

Last week, representatives from developing countries walked out of negotiations, but returned this week after the U.S., European Union and other country representatives came up with a plan to accelerate the development of renewable energy in poor countries, particularly in India and in the Americas.

On Monday, U.S. Energy Secretary Steven Chu announced a new five-year, $350 million international collaborative initiative nicknamed “Climate REDI” designed to encourage the rapid deployment of renewable energy in developing countries. Climate REDI (Climate Renewables and Efficiency Deployment Initiative), will focus on four key areas: a solar lantern and LED lighting program to replace polluting kerosene wick lamps commonly used in developing countries; a super efficient deployment program for appliances; a clean energy information program designed to provide better and globally available information on solar and wind resources; and a scaling up renewable energy program.

Climate REDI addresses a key issue at the Climate Change Conference: the need for rich nations to finance the sustainable development of poorer nations. The U.S. will contribute at least $85 million according to Chu, with $30 million coming from Australia, $5 million from Italy, and the remainder from other partner countries including the United Kingdom, Netherlands, Norway, and Switzerland.
“Climate REDI will save greenhouse gas emissions, save folks money, and fight poverty,” said David Sandalow, U.S. Department of Energy Assistant Secretary for Policy and International Affairs. “It’s a quick start initiative that complements the technologies and financial mechanism of the climate treaty that we are negotiating here this week.”

India’s Environment Minister Jairam Ramesh said Climate REDI funds will help his country develop solar, wind, and small hydro projects more quickly.

“Indian countries helped pioneer pharmaceuticals widely used in Africa, so there is no reason why India, with the help of the United States, can’t emerge as a world leader in low-cost renewable technologies within the next five years,” said Ramesh.

Renewable energy in the U.S. will benefit from a new partnership between the U.S. Department of Agriculture and the American Dairy Industry, which announced on Tuesday it will reduce greenhouse gas emissions by 25% by 2020 using a variety of technologies, including solar and wind energy technologies. The partnership will also provide an additional source of income for the dairy industry, which is in trouble due to the recession.

Legislation passed by the House of Representatives and under consideration in the Senate will create a market for carbon offsets that can be sold by America’s farmers, ranchers and landowners to businesses that are large carbon emitters. Farmers and ranchers will be able to install solar and wind energy systems on their farms to help offset greenhouse gas emissions. Some farmers and ranchers use solar power now to convert methane to power. The USDA will support the dairy industry’s goal through program modifications, added program enhancements that fund electricity generation with renewable energy dollars, and better marketing of anaerobic digesters to dairy farmers.

A third party will verify emission reductions and will be enforced by the USDA. The move is also designed to let industry and the USDA set policy for the farmers and ranchers rather than having the industry regulated by the EPA.

Solar Energy Industries Association (SEIA) President Rhone Resch challenged the American dairy industry “to look at the roof space sitting in the sun” on their farms and to not just think about wind turbines in the field. Rhone also asked the U.S. Secretary of Agriculture Tom Vilsack if the USDA was doing anything to streamline REEF (Renewable Energy and Energy Efficiency Fund), a government program that helps farmers and ranchers to design and plan for renewable energy. Vilsack said the USDA is focused on larger bioenergy programs now, but is planning to address the issue later.

SEIA, along with the European Photovoltaic Industry Association and the Alliance for Rural Electrification, presented new national targets, figures, and analyses on the role of solar energy technologies in combating climate change in a new report called Seizing the Solar Solution, which predicts the combined production of the European and U.S. solar industry alone could reduce carbon dioxide emissions by nearly 1 billion metric tons by 2020.

The International Energy Agency’s (IEA’s) Renewable Energy Technology Deployment group and IEA Bioenergy presented key findings from a joint project called “Better Use of Biomass for Energy,” which identifies opportunities for greenhouse gas reduction using bioenergy technologies. RETD collaborated with the Energy Technologies Systems Analysis Program to create models of global renewable energy scenarios. Their findings predict renewable energy will be a primary energy supply by 2050.

Finally, on Wednesday, Senator John Kerry, the lead author on U.S. climate legislation, announced that despite the challenges the negotiators still face, in June, the U.S. will pass climate change legislation that reduces emissions by 83% by mid-century (2050) using renewable energy and other clean energy technologies.

“The makings of the deal are there. All countries have stepped up to make commitments to reduce emissions. I believe by June we will have a full-fledged international treaty.”

In response to skeptics who say this legislation will not make it through what some conference participants are calling the senate legislative “meat grinder,” Kerry said they are now getting bi-partisan support from senators like Robert Byrd (D-WVA), a coal industry supporter, and Lindsay Graham (R-SC), a conservative Republican, who realize they need to be at the table in these global emission reduction discussions. Kerry was uncertain about how the final climate bill will look, but he stated it will include a variety of renewable energy sources like solar, wind, and concentrating solar power as well as natural gas, nuclear energy, and clean coal technologies.  Carbon pricing will be key to its success, he said.

“I know a significant number of businesses that believe the only way to do it is to price carbon.”
On Thursday, the BBC hosted a debate it’s calling the “Greatest Debate on Earth,” that challenged the world’s top leaders on their commitment and contributions to climate change. The debate will air after the conference on December 19-20.

The formal summit of more than 120 world leaders concludes Friday when President Obama arrives in Copenhagen.  UN members will try to agree on how best to slow rising temperatures set to cause heat waves, floods, desertification and rising ocean levels that threaten all nations.  Rich and poorer nations were split last week on who should bear the burden of emission curbs and raising billions of dollars in new funds to help the poor.  China’s emissions alone will increase by 40% by 2020, according to estimates by the U.S. government.

Lauren Poole is a journalist and science writer based in Colorado. She worked for 11 years at the National Renewable Energy Laboratory, where she wrote extensively about solar and wind energy technologies and policy issues.

NRG Buys California PV Plant

NRG acquires 21MW power plant in Blythe, California from First Solar

23 November 2009 | By Mark Osborne | News > Power Generation

NRG Energy, via its wholly owned subsidiary NRG Solar LLC has bought the yet to be completed solar power plant in Blythe, California, from First Solar. The 21MW project occupies approximately 200 acres of land and is expected to be completed by the end of the year and is claimed to be the first and largest utility-scale PV project in California.
First Solar and NRG did not disclose financial terms, however, First Solar will provide operations and maintenance services at Blythe under a long-term contract with NRG.

"First Solar is very pleased that the first of our utility-scale solar projects in California will be coming on line with a leading power producer like NRG," said Bruce Sohn, president of First Solar. "This clean, affordable, and sustainable energy will help California meet the goals of its Renewable Portfolio Standard."

Electricity from the plant will be sold to Southern California Edison under a 20-year power purchase agreement.

“Solar fields generate the greatest amount of clean energy when electricity demand is highest, making this an ideal technology for utilities, municipalities and companies looking to diversify their renewable portfolios and reduce carbon intensity while ensuring that energy needs are met,” said Tom Doyle, President, NRG Solar. “With this acquisition, NRG joins with SCE to add to and further diversify their portfolio of low- and no-carbon generation while we establish a relationship with First Solar and a platform for future solar development.”

First Solar also said that it is developing 1.3GW of PV solar projects under contracts with utilities in California and the Southwest.

First Solar Buys the Carrizo Energy Solar Farm in Central California

First Solar buys 117 MW project from solar startup

Wed Nov 4, 2009 8:39pm EST

* Solar thermal co Ausra started project in 2007
* Financial terms not disclosed
* First Solar says deal to make way for other project
LOS ANGELES, Nov 4 (Reuters) - Solar industry bellwether First Solar Inc (FSLR.O: Quote, Profile, Research, Stock Buzz) said on Wednesday that it bought a 117 megawatt project in California from Kleiner Perkins-backed solar thermal start-up Ausra Inc, a move that could speed up another 550 MW project in First Solar's pipeline.
The companies did not disclose the financial terms.
Ausra, which is also backed by Khosla Ventures, said that the sale of the project -- called Carrizo Energy Solar Farm -- follows its strategy to move away from developing solar projects and focus on supplying large-scale solar steam generators.
"The sale of Carrizo is another step in executing our plan," said Tom Bartolomei, senior vice president of business development at Ausra, in a statement.
Ausra landed a power purchasing agreement with California utility PG&E (PCG.N: Quote, Profile, Research, Stock Buzz) two years ago for the project, located in San Luis Obispo County. That agreement was withdrawn as part of the sale, the company said.
First Solar can use the newly acquired land to revise the layout of the larger 550 MW Topaz Solar Farm project, which has run into "concerns such as farmland conservation and wildlife needs," said Kathryn Arbeit, who oversees Topaz.
Both projects include land near each other in San Luis Obispo County.
Shares of First Solar closed down 2 percent at $121.59 on Wednesday on the Nasdaq. (Reporting by Laura Isensee; Editing by Steve Orlofsky)

President Obama Stumps for Solar & Smart Grid at FPL's PV Plant Commissioning

President Obama joins FPL for commissioning of nation's largest solar PV power plant; announces $200 million in smart grid funding for FPL's 'Energy Smart Florida'

ARCADIA, Fla. – President Barack Obama joined FPL Group and Florida Power & Light Company officials today for the commissioning of the largest photovoltaic solar facility in the nation. At FPL’s DeSoto Next Generation Solar Energy Center, the President announced that FPL was awarded $200 million in Recovery Act funds to invest in a stronger, smarter, cleaner and more efficient electrical grid, as part of his Administration’s $3.4 billion commitment to spurring the transition to the Smart Grid.
The new 25-megawatt solar array and FPL’s Energy Smart Florida project position the state of Florida as a leader in developing a clean-energy economy for the 21st century, delivering significant economic and environmental benefits to the area.
"For the very first time, a large-scale solar power plant -- the largest of its kind in the entire nation -- will deliver electricity produced by the sun to the citizens of the Sunshine State.  And I think it's about time," said President Obama. "At this moment, there is something big happening in America when it comes to creating a clean energy economy.  But getting there will take a few more days like this one and more projects like this one."
“Today we’re taking the first step into the new clean energy economy of the 21st century. It’s  high-tech, it’s low-emissions, and it empowers consumers to control their energy usage. The President’s Recovery Act made the largest investment in renewable energy and the smart grid in our nation’s history. And in Florida, the governor, the state legislature and the Public Service Commission all demonstrated a strong commitment to making the state a solar energy leader. Our Florida solar projects are creating good construction jobs when they’re needed most, and in the years ahead they’ll create clean energy when it’s needed most. We’re ready to build more solar in Florida, and with the right public policy support, we will,” said FPL Group Chairman and CEO Lew Hay.
The DeSoto Next Generation Solar Energy Center, which uses more than 90,000 PV panels that turn the sun’s rays into electricity to power more than 3,000 homes, is generating significant economic and environmental benefits. At a time when Florida is suffering from the worst economy in a generation, the solar project created 400 well-paying construction jobs. In addition, the DeSoto solar array will avoid 575,000 tons of greenhouse gas emissions.
In addition to the DeSoto plant, FPL is building a 75-megawatt solar thermal facility in Martin County and a 10-megawatt solar PV facility on the Space Coast. FPL’s three solar projects combined are creating more than 1,500 direct jobs and more than 5,000 total jobs for the state of Florida. In addition, they will save 1 million barrels of oil and avoid 3.5 million tons of greenhouse gases.
Energy Smart Florida, which includes a $378 million investment from FPL in addition to the $200 million in federal funding, is expected to create more than 6,000 jobs. The project will install revolutionary new technologies that will help FPL build a more intelligent network that is able to detect potential problems and automatically reconfigure the grid to minimize outages. In addition, smart meters will give customers the ability to see their usage online by the hour, day and month, enabling them to better understand their energy consumption and paving the way for them to make energy efficient, cost-saving choices.
As the nation’s largest producer of solar and wind energy, FPL Group is committed to helping President Obama achieve his goal of doubling the nation’s supply of renewable energy in the next three years. This year alone, the company will invest $2.5 billion in new renewable energy projects and will add approximately 1,200 megawatts of new renewable energy capacity.

Consistent with that commitment, FPL Group subsidiary NextEra Energy Resources has combined the clean power of its renewable energy portfolio with an innovative brand—called EarthEra—to offer everyday ways to fight climate change by building a clean-energy future. Through the use of EarthEra carbon offsets generated from NextEra’s Horse Hollow Wind Project in Texas, the DeSoto Next Generation Solar Energy Center commissioning event today will be carbon-neutral.
FPL’s DeSoto solar project is part of a larger effort by the company to create a clean-energy economy for the 21st century. The energy economy of the future will include a dramatic expansion of renewable energy, a nationwide fleet of plug-in electric vehicles and a smart electrical grid to tie it all together. Today FPL commissioned the largest solar PV power plant in the nation. The company recently announced that it will convert its entire fleet of vehicles into plug-ins over the next decade. FPL’s Energy Smart Florida plan will accelerate the deployment of “smart” meters to 4.5 million customers and incorporate greater intelligence into the transmission and distribution system serving millions of Floridians.
“At FPL, we’re investing every day to make our infrastructure stronger, smarter, cleaner and more efficient. The DeSoto Next Generation Solar Energy Center is a big part of this plan, and Energy Smart Florida is the next big step,” said Florida Power & Light Company President and CEO Armando J. Olivera.
The DeSoto plant was constructed ahead of schedule in less than a year and $22 million under budget. With support from President Obama’s Recovery Act funding, the $150 million total cost of constructing the facility will represent an average of only 6 cents on a typical customer’s monthly bill over the lifetime of the plant.
The plant will generate more than $2 million in additional property tax revenue for DeSoto County through the end of 2010 and $37 million over the life of the project. The influx of workers into the DeSoto County area also helped local businesses during difficult economic times.
The panels used at the DeSoto plant are produced by SunPower Corp. and are the most efficient solar panels on the world market. The plant also uses SunPower’s proprietary tracking system to tilt the panels toward the sun as it moves across the sky, significantly increasing sunlight capture by up to 25 percent over fixed-tilt systems.
“With the completion of the DeSoto Next Generation Solar Energy Center, SunPower’s high-efficiency photovoltaic technology is demonstrating that solar is competitively priced for electric utility power plant applications. SunPower’s sun tracking technology is fast to install, and reliably delivers clean power during peak demand periods,” said Howard Wenger, president, global business units for SunPower. “We congratulate FPL for its global leadership in the development of solar technologies, and for making solar energy a key part of the nation’s economic recovery and the protection of the environment for future generations.”

FPL is currently working with local officials to secure the necessary approvals to expand the DeSoto Next Generation Solar Energy Center even further, with a potential future capacity of up to 300 megawatts. FPL also has several other shovel-ready solar projects that it is positioned to move forward on with legislative and regulatory support. The company’s ultimate goal is to position Florida as a leader in clean-energy generation and as a hub for the development of cutting-edge technology that will rival job corridors in other states.
For more information about FPL’s Next Generation Solar Energy Centers, visit www.FPL.com/solar.
Florida Power & Light Company
Florida Power & Light Company (FPL) is the largest electric utility in Florida and one of the largest rate-regulated utilities in the United States. FPL serves 4.5 million customer accounts in Florida and is a leading employer in the state with nearly 11,000 employees. The company consistently outperforms national averages for service reliability while customer bills are well below the national average. A clean energy leader, FPL has one of the lowest emissions profiles and the No. 1 energy efficiency program among utilities nationwide. FPL is a subsidiary of Juno Beach, Fla.-based FPL Group, Inc. (NYSE: FPL). For more information, visit www.FPL.com.

Solar Power International '09 Kicks off - Coverage by Venturebeat.com

Emboldened by momentum, solar industry asserts rights

October 28, 2009 | Camille Ricketts | Comments |

Solar Power International, the major industry event of the year, is taking place in Anaheim this week and has drawn record attendance — about 25,000 solar entrepreneurs, investors and executives have gathered to showcase new technology, make deals and chart out the future of what may be the fastest growing renewable energy sector in the U.S., if not the world.
Despite the slugging economy, 2009 has been a great launchpad year for many solar companies. The new White House’s support for solar, paired with stimulus package funding and revamped interest from venture capitalists, has diversified the market, and made several large-scale capital projects possible. At the same time, solar now accounts for 13 percent of power purchase deals with utilities, up from 6 percent last year at this time.
All of this momentum has apparently emboldened solar leaders, who yesterday laid down a “Solar Bill of Rights” emphasizing consumers’ right to choice when it comes to their energy mix, and the solar industry’s right to compete on equal footing with traditional energy generators like coal and natural gas. The list of rights was delivered by Solar Energy Industries Association CEO Rhone Resch during the opening session of the SPI conference.
“We declare these rights not on behalf of our companies, but on behalf of our customers and our country,” he said. “We seek no more than the freedom to compete on equal terms and no more than the liberty for consumers to choose the energy source they think best.” Here are the eight rights, as announced:
1. The right for homeowners and businesses to install rooftop solar panels without having to cut through excessive red tape, like permitting and zoning regulations, unnecessary inspections, and additional fees — all tactics the industry believes are being used to keep average citizens from going solar (especially since so many companies like Solar City and SunRun are making it easier than ever to have panels installed and maintained).
2. The right for those who have installed these systems to plug into established electrical grids. In order for solar to catch on, connecting panels can be no more difficult than turning on a phone line, broadband or installing an appliance. There should only be one standard for how to do this so that average consumers don’t have to jump hurdles to begin harnessing the sun’s power.
3. The right for customers who generate extra power with their rooftop solar systems to be compensated for the energy they contribute back to the grid by their local utilities. If people are compensated at retail electricity rates, they will have even more incentive to transition to solar.
4. The right for the solar sector to compete in a fair environment with heavily-subsidized fossil fuel companies. (This will probably take some convincing, as Congress has very clearly leaned toward supporting traditional coal operations in discussions of the climate bill).
5. The right for the solar industry to access and use public lands — at least equivalent to the rights given to the oil and natural gas companies using millions of acres of public land to drill.
6. The right to build new transmission lines to carry solar-generated industry across distances and grid interconnections. Because most large solar arrays need to be built in remote locales, like the southwestern desert, it is important that they be hooked into existing grids with distance load-bearing lines. This is the only way solar will grow as a primary source of energy.
7. The right for average consumers to buy solar electricity from their utilities. As is, some utilities in the U.S. simply don’t offer the option of using solar energy, and there’s nothing their customers can do about it. The industry believes that every consumer, regardless of their location, should be able to opt in to solar energy use.
8. The right for consumers to get the most ethical treatment possible from the solar companies they interact with. This right is different than the others. It’s not asking for acceptance from the establishment, rather, it’s advising itself to deliver on all the promises inherent in solar’s potential. Consumers who take the initiative to use solar energy should be able to rely on the fact that it is better for the environment, reliable and being charged for fairly.
Look for more news from Solar Power International as the week progresses.

Siemens Acquires Solar Thermal Leader Solel for $418 Million

Siemens acquires Israel’s Solel Solar

Financial Times - By Daniel Schäfer in Frankfurt and Fiona Harvey in London



Siemens on Thursday said it would take over Israel’s Solel Solar Systems, in a deal that will give Europe’s largest engineering group a leading position in the fledgling market for concentrated solar power.

The German industrial conglomerate on Thursday acquired Solel Solar for $418m after it won a bidding battle with French rivals Areva and Alstom.

Peter Löscher, Siemens’ chief executive, said the group, which has positioned itself as the “green infrastructure giant” in recent years, aimed to replicate its successful foray into the wind sector five years ago.

Siemens acquired wind power company Bonus Energy for €400m ($598m) in 2004. Since then, Bonus has lifted its revenues almost tenfold to more than €2bn.

“We aim to be the global market leader in the solar thermal sector,” Mr Löscher said.

Solel Solar is one of the two largest makers in the world of solar receivers, and it also builds full-scale concentrated solar power (CSP) plants.

The company has doubled its revenues to almost $90m in the first half of the year. Its previous majority-owner was Ecofin Limited, a London based investment firm.

Siemens also has a stake in Italian CSP company Archimede Solar Energy, which it acquired earlier this year.

Its foray into the fast-growing market followed moves by other German industrial groups such as Bosch into the solar panel business. Bosch has been criticised for overpaying after it bought Ersol, the solar energy company, for more than €1bn last year.

The market for solar panels is seen as overcrowded after Chinese producers have started to flood the market with low-cost products.

But the market for concentrated solar power, also sometimes called concentrated solar thermal power, is one of the brightest spots in the solar market.

CSP uses technology similar to that of conventional fossil fuel power plants. An array of mirrors is angled so as to concentrate the rays of the sun on to a vat containing water, which turns to steam under the heat and drives a turbine. This is both cheaper than solar panels and can be used on a bigger scale.

Siemens estimates that this market will grow at double digit rates in the next ten years and will reach a volume of €20bn by 2020.

Several large scale projects have recently been announced, such as an array of plants in the Indian state of Gujarat, which would have a generating capacity of 3GW and would cost $10bn to build.

Siemens is part of a consortium – called Desertec – that aims to supply up to 15 per cent of Europe’s energy needs by 2050 through thermal and other renewable energy plants in the deserts of North Africa and the Middle East.

Copyright The Financial Times Limited 2009. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

Biomethane - A Primer

October 20, 2009

Biomethane as an Energy Carrier

by Thomas R. Blakeslee, Clearlight Foundation for Renewable Energy World.com

Methane is a better long-distance energy carrier than electricity. Its storage and transportation is much cheaper and easier than electricity. Natural gas pipelines cost half as much to build as electric towers and have about one fourth as much transmission loss. They are also more reliable, safer and visually superior to ugly transmission towers.

Building a hydrogen infrastructure now would be folly. Biomethane can do the job now and will be cleaner and cheaper.

Our electrical grid is only 30% efficient in delivering the energy in fuel burned to the customer. That efficiency could be doubled or even tripled if we used combined heat and power (CHP) generators located where heat is needed. By using the generator's waste heat, an efficiency of 85% is possible. Clearly it is smarter to expand our gas pipeline network than to build more electrical towers to distribute inefficiently generated electricity from massive power plants.

Even though most of our natural gas is now fossil fuel, a doubling of efficiency would be just as effective as achieving 50% renewable power as far as global warming is concerned. We can simultaneously work on greening our gas supply by feeding more and more biomethane into the pipeline.  In Germany 22 billion kWh of biogas were produced in 2007. That's a six-fold increase from 1999, driven partly by feed-in tariffs. About half of that biomethane was from landfill and sewage gas and the other half was from commercial and agricultural biomass plants. Renewable biogas is produced by natural processes of anaerobic digestion or gasification then cleaned up for sale to the gas pipeline. Sweden already gets 25% of their energy from biogas.

Energy storage is another big advantage of gas. Both the gas and the electricity grids need energy storage to take up the slack between production and consumption. Gas storage is cheap because it can simply be pumped into depleted gas wells and salt caverns. We are already storing 4.1 Tcf of gas in the US. At 85% efficiency that gas could produce 1,180 gigawatt-hours of useful power on demand. A very cheap battery!  The smart electrical grid is all about making supply match demand because electrical storage is so expensive.
Though the U.S. power grid uses significant hydro power and other renewables, CO2 emissions are still almost twice as much per kilowatt-hour as a 60% efficient natural gas fuel cell. In 2007 the U.S. power grid emitted 605 grams/kWh. The fuel cell emits only 340 grams. EIA data makes it easy to track the effects of our attempts to green the electric grid: In 1996 we emitted 627 grams of CO2 per kWh and by 2007 this was reduced to 605 grams. That’s a 2-gram per year decrease. If we continue at that rate, it will take 139 years to equal what we can do now with a fuel cell. Recent years show even less progress. There was no improvement between 2006 and 2007. Plugging into the grid is, unfortunately, a bit like plugging into a lump of coal.

People have already begun selling renewable gas into the pipeline.  Landfills, manure piles and sewage plants that used to release significant amounts of methane into the atmosphere are now selling it as green gas. Biomass and garbage can also be gasified to add to the supply. The energy balance of Grass Biomethane production is 50% better than annual crops now used. When biogas is captured instead of releasing it to the atmosphere we get a double bonus. Methane is 72 times worse than CO2 as a cause of global warming in a 20-year time frame. You may have heard 25 times, but that's based on a 100-year time frame. Methane only persists about 8 years. Also, when manure piles are covered, N²O, which is 289 times worse than CO², can also be captured. Coal mines emit almost a trillion cubic feet of methane into the atmosphere every year.

In Cincinnati, Ohio, the 230-acre Rumpke landfill has been capped and the gas is cleaned and delivered to the pipeline to provide enough gas for 25,000 Duke Energy customers. China has an estimated 31 million biogas digesters mostly on small farms. They produce in total about 9 Gigawatts of renewable energy which is mostly used locally. Germany, Denmark, Sweden, Finland and now Ontario, Canada have feed-in tarrifs to encourage production of biogas. In Germany small farms can receive up to 25 cents per kWh for biopower. In the US, bills like SB306 that support biogas production, are still stuck in committee.
Increased system efficiency means we will need less of these renewable sources to do the job. If we’re going to gasify biomass, it is more efficient to upgrade the gas and send it through the gas grid to customer CHP units than to generate electricity less efficiently and send it over less efficient, more expensive power lines to the customer. Until we get more efficient electrical generators, generation should always be done where the waste heat can be put to good use.

Electric cars would be twice as efficient if they fueled up with natural gas and used a fuel cell to recharge a small battery. Like a hybrid with a natural gas fuel cell range extender. The expense and weight of a large battery is eliminated and the energy can be stored in a much lighter and cheaper tank. Refuelling can be much faster and could even be done at home from your natural gas connection. New, low pressure, adsorption tanks make this easy because they only require 500 psi of pressure. Recharging is a problem with batteries.  A 110v, 20A household plug can only supply 2.2 kW, which means that 10 hours of home charging will only take you 10 x 2.2 x 4 mi/kW = 88 miles. Natural gas refueling infrastructure is in place in much of the world to refuel five million vehicles worldwide.

We already have prototype hydrogen cars that work on a similar principle but hydrogen has virtually no refueling infrastructure. Hydrogen is very expensive to produce, store and transport. Its tiny molecules find the smallest leaks and fly into space. They embrittle pipeline metals by nestling into the metal matrix. Storage is extremely inefficient, requiring extremely high pressure tanks or cryonic vessels. One giant hydrogen delivery truck can service about ten customers.  Methane has one carbon atom that holds four hydrogen atoms in a tight formation making containment and dense storage easy. A gallon of liquid methane actually holds 2.5 times as much hydrogen as a gallon of liquid hydrogen!

"No carbon emissions" sounded like a great idea but 95% of our hydrogen is made from natural gas and that process emits about 30% more CO² than if we simply burned the methane. Yes, you can make hydrogen from water with electricity (at about 70% efficiency.) But you can also make carbon-negative methane from CO² and hydrogen. When you burn it, the net result is carbon neutral. The “carbon-free” cleanness of hydrogen is an illusion. Building a hydrogen infrastructure now would be folly. Biomethane can do the job now and will be cleaner and cheaper.

Sempra Acquires Maui Wind Project

Sempra buys Hawaii wind energy, battery storage project from Shell

Sempra Energy’s generation unit has acquired Auwahi Wind Energy, a company developing a 22-megawatt wind energy and battery storage project in Maui, Hawaii, from Shell WindEnergy, a subsidiary of Royal Dutch Shell.

Related Stories

• Hawaiian utility buys power from rivals to avert bidding war
• Hawaii puts rivals to work in new wind arrangement
• Hawaii's Hoku Scientific’s loss widens

Terms of the agreement were not disclosed.

The proposed Auwahi Wind Energy project could begin construction in 2011 and commence commercial operations in 2012 on the Ulapalakua Ranch in the remote southeastern region of Maui.

The battery could store as much as 28 megawatt-hours of wind energy generated by the project's windmills during the typically windy morning and night hours.

The battery power could be stored until late afternoon, when electricity consumption typically reaches its peak, or could be utilized to regulate and smooth intermittent wind power, providing a valuable source of grid stability for Maui Electric.


Sempra Generation recently submitted a proposal to the US Energy Department to co-fund costs associated with an expansion of the battery energy storage facility to 72 MW hours.

Sempra officials say the integrated wind and battery energy storage project could serve as a prototype to help maximize the energy output of other wind power projects in Hawaii and worldwide.

The project would help Maui attain its goal of achieving 95% of its electricity from renewable sources by 2020.

"Consistent with our growing renewable presence in the southwestern United States, this project further expands Sempra Generation's footprint in one of the fastest growing renewable energy markets while further advancing the sustainability goals of Maui and the state of Hawaii," says Michael W. Allman, chief executive of Sempra Generation.

Dick Williams, president of Shell WindEnergy, notes the sale does not signify a retrenchment by the company with clean energy projects.

"Shell WindEnergy has re-assessed its wind development efforts in Hawaii and will concentrate on projects on the US mainland and Canada that are more aligned with our strategic direction," he says.
Williams says that Shell’s portfolio consists of eight wind farms in the US with total generation capacity of almost 900MW. The company’s strategy remains to diversify its energy mix by developing energy sources that have low carbon emissions.

In 2008, Hawaii and DOE set goals associated with the state's Clean Energy Initiative, which aims to accelerate indigenous renewable energy development on the island chain. Hawaii now depends 99% on imported fuel oil for power generation.

For its part, Sempra, based in San Diego, California, is working to broaden its participation in green energy development.

It has a 50-50 investment with BP Wind in the second phase of the Fowler Ridge Wind Farm, the Midwest's largest wind power project in Benton County, Indiana.

Another Sempra Generation wind project slated for completion in 2012 is Energia Sierra Juarez in Baja California, Mexico.

In 2008, Sempra Generation completed the construction of North America's largest thin-film solar power plant, the 10MW El Dorado Solar near Las Vegas, Nevada.

Source:  www.rechargenews.com

DOE Announces Loan Guarantee Program for Commercial Projects - FIPP

Energy Department Announces New Private Sector
Partnership to Accelerate Renewable Energy Projects

10/16 Add:  Link to Milbank Article Describing the Program

New Financial Institutional Partnership Program will accelerate deployment of billions
in lending under Recovery Act

Source:  Department of Energy Website

NEWS MEDIA CONTACT: (202) 586-4940

FOR IMMEDIATE RELEASE: Wednesday, October 7, 2009

Washington DC --- U.S. Energy Secretary Steven Chu today announced the Department of Energy (DOE) will provide up to $750 million in funding from the American Recovery and Reinvestment Act to help accelerate the development of conventional renewable energy generation projects. This funding will cover the
cost of loan guarantees which could support as much as $4 to 8 billion in lending to eligible projects, and the Department will invite private sector participation to accelerate the financing of these renewable energy projects. To this end, the Department announced the creation of its new Financial Institution Partnership Program (FIPP), a streamlined set of standards designed to expedite DOE’s loan guarantee underwriting process and leverage private sector expertise and capital for the efficient and prudent funding of eligible projects. 

“A renewable energy economy is a true opportunity to create new jobs, reinvigorate America’s competitiveness and support the president’s goal of doubling renewable energy in the United States,” said Secretary Chu. “American innovation can be the catalyst that jumps starts a new clean energy Industrial Revolution.” The Recovery Act created a new Section 1705 under Title XVII of the Energy Policy Act of 2005 (Title XVII) for the rapid deployment of renewable energy projects and related manufacturing facilities, electric power transmission projects and leading edge biofuels projects that commence construction before September 30, 2011.

This first solicitation under the new program will seek loan guarantee applications for conventional renewable energy generation projects, such as wind, solar, biomass, geothermal and hydropower. Past solicitations for
renewable energy generation projects have focused on loan guarantee applications using new or innovative technologies not in general use in the marketplace.

The goal of FIPP is to leverage the human and financial capital of private sector financial institutions by accelerating the loan application process while balancing risk between DOE and private sector partners participating in the program. Under this first FIPP solicitation, proposed borrowers and project sponsors do
not apply directly to DOE but instead work with financial institutions satisfying the qualifications of an eligible lender which may apply directly to DOE to access a loan guarantee. The solicitation invites applications from eligible lenders for partial, risk-sharing loan guarantees from DOE. The guarantee percentage will be no more than 80% of the maximum aggregate principal and interest during a loan term, and the project debt must obtain a credit rating of at least ‘BB’ or an equivalent with a nationally recognized credit rating agency.
This solicitation marks the eighth round of solicitations issued by the Department’s Loan Guarantee Program since its inception.

Read more information on this solicitation and the Department’s Loan Guarantee Program at www.lgprogram.energy.gov.

GE Comes Out Strongly Against Trade Barriers

General Electric: Tear Down That Wall! The Green Tariff Wall, That Is

By Keith Johnson, Wall Street Journal

Embracing protectionism, after a fashion, is shaping up as one way to pass climate legislation and start saving the planet.
Wrong move, says General Electric, a company with an obvious and multi-billion dollar interest in keeping trade avenues open, especially when it comes to clean technology.
It’s a timely argument. This morning, the House Subcommittee on Commerce, Trade, and Consumer Protection is holding a hearing on “Growing U.S. Trade in Green Technology,” part of the national hand-wringing over how to close the windmill gap. The question is how to jumpstart the U.S. clean-technology industry—by coddling it or by unleashing it?
GE’s argument: Cleaning up the world means installing more—not less—clean-tech gear. And that means fewer—not more—restrictions on clean-energy trade, even as the U.S. is desperate to jumpstart its domestic clean-energy industry and close a perceived gap with rivals such as China.
Granted, as GE’s managing director for international energy policy Tim Richards told Congress today, the U.S. is far from the worst offender. Countries such as China, Mexico, Russia, India, and South Korea all slap higher tariffs on wind turbines than the U.S. does. Other countries, especially China, also use other trade weapons, from “Buy Chinese” provisions to questionable bidding procedures for energy projects that seem to always exclude foreign firms.
The point is, that tearing down existing trade barriers and preventing their return would not only benefit America’s clean-tech sector in the long run (the global market is a little bigger than the domestic market) it would also bring quicker and bigger benefits to the environment.
“Liberalization of trade for green products and services offers a rapid, high-impact step governments can take to lower the cost of cleaner energy technologies, resulting in more economically viable solutions for reducing greenhouse gases,” Mr. Richards testified.
That doesn’t mean totally “free” trade in clean-tech gear. Like many other big U.S. companies, GE is worried about intellectual property protection, especially as developing countries are increasingly clamoring for cheap or free access to Western technology as the price for playing ball on climate change.
That would be “counterproductive” to the whole goal of cleaning up the world’s energy mix, GE says, since it would “deter innovation and technology deployment.”
In other words, GE’s recipe for creating a healthy clean-tech sector is simple: Keep it open, and keep it profitable.

Treasury Awards Second Round of Recovery Act Grants; +$1 Billion Out Since August

Clean-Energy Grants: Iberdrola Wins Big, Again

By Keith Johnson September 22, 2009, 12:50 PM ET

When it comes to clean-energy grants from the U.S. government, it’s déjà vu all over again.
That is, Spain’s Iberdrola was again the big winner in the second round of government grants for wind farms: Iberdrola scooped up $251 million of the $550 million awarded today. The grants cover three Iberdrola wind farms in Iowa, Texas, and Missouri.
The cash-in-hand grants are an alternative way for the government to subsidize clean energy after the implosion of the tax-equity market last year. Iberdrola was also the biggest winner in the first round of the grants, announced earlier this month. So far, Iberdrola’s U.S. wind farms have snared $545 million in grants.
Germany’s E.On took home the biggest single prize, a $121 million grant for the Pyron Wind Farm in Texas, underscoring the role that European wind developers have in the U.S. wind-power market.
But do the grants amount to a bailout of foreign energy companies? Duke University figures the growth of wind power in the U.S., even if spearheaded by Europeans, will in fact help restore manufacturing jobs for U.S. companies. (Here’s the study.)
That’s because much of the value chain in wind power is suited to U.S. firms. The Duke study found that every 100 megawatts of wind power that are installed–a pretty typical-sized wind farm–creates 387 total jobs, including 310 in manufacturing.
“Every time a wind power project is installed it creates jobs, not only in the manufacturing sector, but also for structural engineers, surveyors, mechanics, sheet metal workers, machinists, truck drivers, construction equipment operators and wind turbine operators,” said Duke professor and study co-author Gary Gereffi.

• « Previous
  At the Summit: Obama, Hu Lay Out Climate Visions at UN
• 
  

Environmental Capital HOME PAGE

FROM THE DOE: The following is a chart of the 25 projects that qualified for awards as part of today's announcement.

STATE	PROJECT/SUBSIDIARY	LOCATION	AMOUNT
CA	Bob's Big Boy LLC	Burbank, CA	$53,648
CA	Ameresco Half Moon Bay LLC	Half Moon Bay, CA	$6,641,747
CA	Ameresco Keller Canyon LLC	Pittsburgh, CA	$2,796,377
CA	BioFuel Oasis Cooperative, Inc	Berkely, CA	$16,858
CO	5135 Company	Denver, CO	$23,130
FL	Conditioned Air Corporation of Naples	Naples, FL	$50,250
HI	Two Daughters	Kihei, HI	$15,150
IA	Barton Wind Farm	Kinsett, IA	$93,419,883
MN	BI	Minneapolis, MN	$25,649
MN	Spruce Tree Centre	St. Paul, MN	$107,764
MO	Farmers City Wind Farm	Tarkio, MO	$84,959,857
MO	Ameresco Jefferson City LLC	Jefferson City, MO	$2,300,244
NC	Solar Billboard Property	Bolivia, NC	$5,850
NJ	Meadowlands Exposition Center	Secaucus, NJ	$767,937
NJ	EHT Leasing LLC	Egg Harbor Township	$118,560
NJ	OC Kearny	Kearny, NJ	$992,006
NV	Enel Salt Wells, LLC	Fallon, NV	$21,196,478
NV	Enel Stillwater, LLC	Fallon, NV	$40,324,394
NY	OP 110 E. 59th St. CHP	New York, NY	$415,774
SD	Impervious Energy Systems, LLC	Whitewood, SD	$31,511
TX	Barton Chapel Wind Farm	Jacksboro, TX	$72,573,627
TX	Rio Grande Valley Sugar Growers, Inc.	Santa Rosa, TX	$10,232,261
TX	Bull Creek Wind LLC	O'Donnell, TX	$91,390,497
TX	Pyron Wind Farm, LLC	Roscoe, TX	$121,903,306
VT	Wheeler Brook Apartments	Warren, VT	$19,155
			$550,381,913

Wind Farm Finance Picks Up

Wind Farms Set Wall Street Aflutter

By RUSSELL GOLD

Associated Press

A new program offering cash rebates on renewable energy investments is sparking interest in wind farms. A worker atop a windmill in Maine.

After nearly a six-month lull, Wall Street is getting back into the business of financing new wind farms.

Morgan Stanley and Citigroup Inc. have invested $100 million each to finance separate wind farms this month, taking advantage of a brand-new federal program that is paying substantial cash grants to help cover the cost of renewable energy investments.

Bankers say this is the beginning of an active pipeline of new wind-farm financing, as well as investment in large solar installations and geothermal facilities. Project developers and Wall Street appear to be viewing the federal cash grant program as such a good deal, industry experts say, it may grow much larger than its Washington creators expected.

"The money is coming back," says Ethan Zindler, head of North American research at consultant New Energy Finance Ltd.

Under the program, the government will give a cash rebate for 30% of the cost of building a renewable-energy facility, awarded 60 days after an application is approved. Investors are also given valuable accelerated depreciation deductions, which help offset taxes.

The Energy and Treasury departments have said they expect to spend $3 billion on the program, which started July 31 and runs through the end of 2010, and was part of the stimulus bill. But a government spokesman says requests for $800 million in grants were submitted during the first four weeks.

Some Wall Street bankers say they expect applications to grow to $10 billion, based on projected wind-power installations.

"We see opportunities and we are pursuing them pretty actively," says Kevin Walsh, managing director of General Electric Co.'s GE Energy Financial Services division, which was a major financier of wind deals in the past.

The strong interest echoes the $3 billion cash-for-clunkers program that provided incentives to trade in older, lower-gas mileage cars, and which was quickly overwhelmed by demand. "We are concerned that this may evolve into a cash-for-clunkers version 2.0," says a spokesman for Rep. Darrell Issa, a California Republican.

But unlike the popular cash-for-clunkers programs, there is no spending cap on the renewable energy grants, and the government has committed to spending as much as is needed to keep renewable-energy investments flowing.

Under an earlier renewable energy program, the government gave companies tax credits over 10 years, which were attractive as long as financial firms believed they would be generating taxable profits for years to come. When Wall Street imploded last year, profits turned to losses and appetite for these investments disappeared quickly. Some of the companies most active in these deals -- including Lehman Brothers Holdings Inc. and American International Group Inc. -- were hobbled or destroyed by the turmoil.

But the new cash grants are offering the potential for attractive returns. Several bankers interviewed said they expected deals to provide an annual return of anywhere from 9% to 15%.

Most of the investments are expected to go to wind projects, because the industry is more mature and in a better position to capture limited funds. "I would not be surprised if the program is ridiculously successful and spurs a huge amount of development," says Liz Salerno, director of industry analysis for the American Wind Energy Association.

More

• Duke Energy Makes More Investments in Wind Farms

Even capital-constrained financial giant Citigroup has been drawn to wind power. In August, it made a $120 million investment in a large wind farm under construction in the rolling hills of northern Pennsylvania. The project, called Armenia Mountain by developer AES Corp., will deliver about 100.5 megawatts of power-generation capacity from 67 turbines, each the size of a 20-story building.

The quick returns provided by the cash grant "made it an attractive investment option," said Sandip Sen, Citi's global head of alternative energy.

It's not just Wall Street banks that are attracted. Iberdrola SA, a Spanish company that is the world leader in renewable energy by capacity installed, said in July that it expects to tap $500 million in cash grants for U.S. wind projects. "We've been in contact with the Treasury Department and we think the $3 billion is a minimum-type number," said Ralph Curry, chief executive of Iberdrola's U.S. business unit.

The Treasury Department didn't return calls seeking comment.

Additional financing from the grants would potentially benefit major wind-farm developers such as Florida utility FPL Group Inc. and large-scale solar developer Edison International. It could also give a boost to manufacturers who make the turbine blades and solar panels, such as Vestas Wind Systems A/S and First Solar Inc.

Morgan Stanley recently made a $120 million investment in a Montana-based wind farm developed by Grupo Naturener SA. "The cash grants are a good deal for both developers and financial backers," says Martin Torres, a Morgan Stanley vice president who worked on the deal.

"If we have a quick recovery and we're going like gangbusters again, you could easily get to $10 billion in two years," says Kevin Book, managing director of ClearView Energy Partners LLC, a Washington consultant.

Write to Russell Gold at russell.gold@wsj.com

DOE Loan Guarantee Solicitation

On August 6, the DOE issued the following solicitation:

Click here for link to DOE Solicitation

Note page 7:

D. Eligible Project

In accordance with the definition set forth in Section 609.2 of the Final Regulations, an “Eligible

Project” is a project located in the United States that employs a New or Significantly Improved

Technology that is NOT a Commercial Technology.

Click here for DOE Loan Guarantee Website for New Information

Solar Thermal Takes Off In Spain

Wall Street Journal

MADRID -- After positioning Spain as the third-largest wind power producer after the U.S. and Germany, renewable energy companies are now racing for a foothold in the country's fast-growing "solar thermal" market.

Reuters

A worker makes adjustments at an Acciona solar thermal power plant ahead of its inauguration last month in Alvarado, Spain. Companies plan to spend about $24.5 billion on a number of similar plants, spurred by government subsidies and renewable-energy goals.

Concentrating solar thermal technology, as it is known, uses mirrors to focus the sun's rays onto a central receiver, generating steam that powers electric turbines. What makes the technology unique is that the solar heat can be stored, offering a key power backup for electric grids. Conventional photovoltaic solar power has to be used on the spot.

Large power utilities are attracted by solar thermal plants, because their operation is similar to that of conventionally fueled steam power plants. Their storage capacity, using tanks of molten salt that retain heat, makes it possible to develop big plants that can generate power around the clock.

Government figures show Spain has close to 30 solar thermal plants under construction. Companies are seeking clearance for projects that would add 4,300 megawatts of capacity -- enough to cover about two-thirds of New York City's power demand on a spring day -- representing an investment of about €17 billion (about $24.5 billion).

"After wind power, solar thermal technology will be the second great renewable column of the company in the short term," said Jose Manuel Entrecanales, president of Acciona SA, a Spanish construction company that has expanded into renewable energy.

The boom comes with a number of caveats. While fuel costs are minimal, developing solar thermal energy plants is expensive -- around €4 million per megawatt, compared with about €650,000 per megawatt for a modern natural-gas power station. The technology isn't universally acclaimed: one criticism is that is that it requires a backup in the winter to keep the central receiver warm. Meanwhile, government incentives related to solar thermal power are expected to be curtailed.

Still, given Spain's sunny climate, experts say solar thermal power could be key to reaching the European Union's goal of having a fifth of all energy come from renewable sources by 2020.

"The government is very interested in solar thermal energy because it's the most suitable technology for Spain's weather," said Deputy Energy Minister Pedro Marin. "Because of its storage capacity, it's also the only manageable renewable energy source for the power grid."

Iberdrola SA unit Iberdrola Renovables and Acciona, two of the world's biggest wind-power companies, along with Abengoa SA, are among the companies with projects in the pipeline.

The ramp-up will take time. Once approved by the government, thermal plants take between one and three years to build. The Spanish government expects solar thermal generation capacity to rise from the current 183 megawatts to around 800 megawatts by the end of 2010, roughly the capacity of a small nuclear plant.

By 2020, however, Spain could have up to 8,000 megawatts of installed solar thermal power capacity, said Jose Monzonis, head of solar thermal operations at Acciona.

Acciona switched on its first Spanish solar thermal plant in July. It has three more plants under construction and a pipeline of projects with a total planned capacity around 1,200 megawatts, according to Esteban Morras, head of the company's energy division. Although the global financial crisis has forced Acciona to cut its investment in wind power operations, spending on its solar thermal business will rise this year, Mr. Morras said.

This buoyant trend could be damped by imminent regulatory changes. Analysts say a stable and generous pricing system implemented two years ago, which sets a premium for power from solar thermal technology over market prices, has been a key factor boosting expansion. But the government is expected to reduce the premiums in September and limit the amount of solar thermal power that can be brought on line each year, in order to keep expensive solar thermal power from pushing up the price of wholesale electricity and thus consumers' power bills.

"We have already suffered delays in some of our projects because of the regulatory uncertainty," said Santiago Seage, head of Abengoa's solar division. But he notes that a reasonable reduction in premiums will soften, rather than block, the local solar thermal market.

"If this happens, what will change is the pace of new installations," Acciona's Mr. Entrecanales said. "Companies will have to plan better."

ITC vs. PTC vs. Cash Grant

Renewable Project Finance Options: ITC, PTC, or Cash Grant?

Norbert Richter, Power Magazine

(Click here to review the white paper from The National Renewable Energy Laboratory

Dozens of institutional investors in U.S. renewable energy projects pulled out of the market when the nation’s liquidity reserves dried up late last year. Some left the renewable market sector in search of more lucrative investment opportunities. Others found themselves unable to take advantage of the attractive tax credits because they themselves lacked profits against which to use the credits. The American Recovery and Reinvestment Act of 2009, approved February 13, changed the investor ground rules — again.

The American Recovery and Reinvestment Act of 2009 (ARRA) gives investors, owners, operators, and financiers a choice of government credits that may help push forward renewable projects that otherwise might be turned down. The purpose of this article is to provide a summary of the ARRA as it affects federal support for renewable energy projects as well as an explanation of how the renewable investment rules of the road have changed with the stimulus incentive package.

Large insurance companies and investment banks that engage with project developers provide the bulk of renewable energy project financing. The ARRA offers to those financiers a number of very useful incentives for renewable energy projects that can be tailored to individual project needs. By using complex financial models and structures that are designed to leverage the federal government’s support for renewable technologies, investors can use accelerated depreciation and tax credits to offset tax liabilities. Now, with the expanded variety of production tax credits (PTC), investment tax credits (ITC), and cash grants to choose from, investors must consider the benefits of each incentive for their respective projects (see sidebar).

Renewable Project Tax Credit Options The American Recovery and Reinvestment Act of 2009 (ARRA) gives developers of renewable power generation projects the option to select an investment tax credit, a production tax credit, or a cash grant. Previously, there was no cash grant option, the tax credits were directly linked to particular technologies, and renewal was always problematic. The rules have changed. The production tax credit (PTC) was originally authorized by the Energy Policy Act of 1992 to provide a 10-year, inflation-adjusted tax credit based on the energy produced by qualified wind, closed- and open-loop geothermal, biomass, and small hydroelectric projects, among other technologies. The PTC has been renewed several times since the original legislation. Generally, wind and closed-loop geothermal projects received the entire credit of $21/MWh (as of 2008) and other eligible technologies received half the credit. The PTC rules also continue to require that electricity sales be to an unrelated party, and limitations related to eligibility with other public sector grants, tax-exempt bonds, and other federal tax credits remain. The ARRA extends the credit for wind projects placed in service prior to the end of 2012 and for other technologies through 2013. The investment tax credit (ITC) continues to provide a tax credit for commercial energy projects such as solar, fuel cell, and small wind up to 30% of the project’s qualifying costs and for other geothermal, microturbine, and combined heat and power projects up to 10% of the project’s qualifying costs. The ITC for fuel cells and microturbines has a cap; the others do not. Also, the ITC must be taken in the year that the project enters commercial operation, but it vests over a five-year period. If the project is sold within the first five years of operation, the Internal Revenue Service will recapture a portion of the credit. What’s new is that the ARRA extends the credit for projects placed in service prior to the end of 2016, although credits for geothermal projects have no expiration date. The solar tax credit is currently slated to drop to 10% at the end of 2016. Perhaps the most significant new element is that those eligible for either the PTC or ITC may elect to receive a cash grant of equivalent value. The grant is excluded from gross income of the company, and the depreciable basis of the property must be reduced by one-half of the grant amount. Generally, the PTC or ITC make more economic sense for companies that can use the entire credit.

Good News for Renewables

The ARRA has several finance-based provisions that renewable stakeholders can now consider. These changes will influence how financing decisions are made on both qualitative and quantitative issues. The key changes include these:

• The PTC in-service deadline is extended through 2012 for wind projects and through 2013 for open- and closed-loop biomass, geothermal, municipal solid waste, qualified hydroelectric, and marine hydrokinetic facilities.

• Project financiers may now elect the ITC in lieu of the PTC. The ARRA allows PTC-qualified facilities installed in 2009 through 2013 (2009 through 2012 in the case of wind) to elect a 30% ITC in lieu of the PTC. If the ITC is chosen, the election is irrevocable and requires the depreciable basis of the property to be reduced by one-half the amount of the ITC.

• Project financiers may also elect a cash grant in lieu of the ITC. This new program provides grants that cover up to 30% of the cost basis of qualified renewable energy projects that are in service in 2009 – 2010 or that commence construction during 2009 – 2010 and are in service prior to 2013 for wind, 2017 for solar, and 2014 for other qualified technologies. The grant is excluded from gross income, and the depreciable basis of the property must be reduced by one-half of the grant amount.

• The ITC-subsidized energy financing penalty is removed, allowing projects that elect the ITC to also utilize "subsidized energy financing" (such as tax-exempt bonds or low-interest loan programs) without suffering a corresponding tax credit basis reduction. This provision also applies to the new cash grant option.

• Bonus depreciation of 50% is extended (that is, the ability to write off 50% of the depreciable basis in the first year, with the remaining basis depreciated as normal, according to the applicable schedules) to qualified renewable energy projects acquired and placed in service in 2009.

• The loss carrryback period is extended from two to five years for small businesses (those with average annual gross receipts of $15 million or less over the most recent three-year period). This carryback extension can only be applied to a single tax year, which must either begin or end in 2008.

• ITC dollar caps are removed, eliminating the preexisting maximum dollar caps on residential small wind, solar hot water, and geothermal heat pump ITCs. The dollar cap on the commercial small wind 30% ITC is also eliminated, and credits may be claimed against the Alternative Minimum Tax.

• The existing loan guarantee programs to cover commercial projects are expanded to include support of up to $60 billion to $100 billion in loans, depending on the risk profiles of the underlying projects.

• Clean renewable energy bonds (CREB) get more funding: $1.6 billion in new CREBs is added for eligible technologies owned by governmental and tribal entities, municipal utilities, and cooperatives. Combined with the $800 million of new CREB funding added in October 2008, new CREB funding totals $2.4 billion.

Pick Your Poison

Cash flow model studies funded by the Department of Energy have been developed to help quantify the benefit of PTC and ITC incentives. Given installed project costs and expected capacity factors — along with assumed federal and state tax rates — the models calculate the present value of the ITC, PTC, and cash grant at nominal discount rates of 5%, 7.5%, and 10%. Depending on the project type and constraints, your tradeoff choice between the federal incentives may be clear or marginal.

For example, a wind project that uses a discount rate of 7.5%, costs $2,000/kW installed, and with an expected capacity factor of 30% results in a 1.3% net value advantage for using the ITC instead of the PTC. Using the same assumptions, but with a project cost of $1,700/kW and an expected capacity factor of 40%, yields a 10.4% increased value for the PTC.

Generally, wind projects with lower installed costs and higher capacity factors find that the PTC provides greater benefit than the ITC. Because a higher capacity factor results in more production, the PTC seems to have higher project value for projects that can operate near the plant’s rated output for more hours each year.

Consider another example of an open-loop biomass project, the same discount rate, a capacity factor between 60% and 90%, and a project installed cost ranging from $3,000/kW to $5,000/kW. Using these parameters and several other assumptions (depreciation schedules and PTC applicability to biomass projects), calculations show that the ITC produces more financial benefits for the project than the PTC.

More Details to Consider

The relative value of each federal credit is among the most important considerations when deciding among the PTC, ITC, and cash grant. However, there are other qualitative considerations that may affect a manager’s decision, such as those that follow, especially when the quantitative differences between the PTC and ITC are slim.

Subsidized Energy Financing. The stimulus package removed the "double-dipping" penalty for the ITC, but not for the PTC. As a result, any PTC-eligible project that can secure "subsidized energy financing" may be better off electing to take the ITC (or equivalent cash grant) rather than sticking with a diminished PTC. Prior to the stimulus bill, the values of both the ITC and the PTC were reduced proportionally (with the PTC reduction limited to a maximum of 50%) by the amount of a project’s installed costs that was financed using "subsidized energy financing" (such as government-sponsored low-interest loan programs).

Option to Elect Equivalent Cash Grant. The ARRA not only enables PTC-eligible projects to elect a 30% ITC, but it also allows projects eligible for a 30% ITC to elect a cash grant of equivalent value instead. The availability of a U.S. Treasury – backed cash source might drive some PTC-leaning projects toward the 30% cash grant option, even if the PTC promises a higher expected value.

Owner/Operator Requirement. The ITC does not require the owner and operator to be the same entity, which opens the door to a variety of leasing structures, including sale/leasebacks and inverted pass-through leases. With the exception of biomass projects, the project owner must also operate the project in order to claim the PTC.

Performance Risk. Receiving ITC or cash grants is not dependent on project performance, whereas the PTC is dependent on asset output. The certainty offered by the ITC over the performance risk inherent in the PTC — even if the PTC promises a higher expected value — may make the ITC more attractive.

Power Sale Requirement. The ITC does not impose a power sale requirement, making it a more widely applicable incentive. In order to be PTC eligible, the qualifying renewable power must be sold to an unrelated party.

Tax Credit Demand. Tax equity investors rely on having a tax base that can fully absorb all of a project’s tax benefits over the coming decade before they invest in a 10-year PTC project. Even though depreciation deductions still occur for a multi-year period, the ITC greatly reduces the need for future tax shelter because the full credit is realized in the project’s first year. This also means that to fully absorb the ITC, an investor must have a larger tax base (compared to the PTC) during the first year of the project. Should a project elect to take the 30% cash grant instead of the ITC, the importance of tax equity investors and the tax credit demand is reduced (though it may still be needed in order to maximize allowable depreciation deductions).

Liquidity. The fact that the ITC, or equivalent cash grant, is selected in the project’s first year leads to a relatively more illiquid investment. Potential buyers of the project no longer have access to the credit once the project owner realizes the ITC. Consequently, the ITC vests linearly over a five-year period, forcing the investor to hold on to the project for at least five years in order to fully realize the ITC value. With the PTC, credits are realized in real time over a 10-year period as the project generates power. The sale of a PTC project can then occur at virtually any time (ignoring the influence of depreciation recapture), whereupon any remaining PTCs transfer to the new owner.
—Norbert Richter (norbert.richter@duke.edu) is an industry consultant specializing in renewable energy project evaluation and finance.

For More Information

An excellent reference source on the American Recovery and Reinvestment Act of 2009 and the modeling techniques described in this article is found in "PTC, ITC, or Cash Grant? An Analysis of the Choice Facing Renewable Power Projects in the United States" published in March by Lawrence Berkeley National Laboratory and the National Renewable Energy Laboratory. The entire report is available at http://eetd.lbl.gov/EA/EMP/reports/lbnl-1642e.pdf.