Renewable Energy Projects: The Economic Crisis and Federal Funding Sources in 2009

1. Renewable Energy Projects: The Economic Crisis and Federal Funding Sources in 2009 R. Thomas Amis

2. Overview • The Economic Crisis & Renewables • Federal Resources for Financing Renewable Energy • The Federal Investment Tax Credit (ITC) & Production Tax Credit (PTC) • The U.S. Department of Energy Loan Guarantee Program • Additional Stimulus Provisions

3. The Economic Crisis & Renewable Energy

4. The Economic Crisis & Renewables Every Institutional Investor Hit Hard

5. The Economic Crisis & Renewables Significant U.S. Market Devaluation Overall

6. The Economic Crisis & Renewables Directly Impacting Venture Capital & Private Equity (VC/PE) Investments in Renewables Globally in 2008 and 2009

7. The Economic Crisis & Renewables U.S. Still World Leader in VC/PE Investment in Renewable Energy in 2009

8. The Economic Crisis & Renewables U.S. deals are still closing • March 2009 VC/PE Deal Closings • Nordic Windpower: $3.5m (wind) • Sencera International Corp: $15.6m (solar) • Coulomb Technologies: $3.8m (transportation) • H2Gen Innovations Inc.: $4.5m (hydrogen) • Synapsense Corporation: $7m (efficiency) • Esolar (formerly EcoSolar): $30m (solar)

9. The Economic Crisis & Renewables Structuring Your Deal for Success • Institutional Knowledge • Legislative and Regulatory Knowledge • Rigorous financial modeling to capture local, state and federal renewable incentives

10. Federal Funding Sources for Renewable Energy

11. Federal ITC & PTC 2009 • Two Significant Legislative Changes: • The Energy Improvement and Extension Act of 2008, enacted in October 2008. • TheAmerican Recovery and Reinvestment Act of 2009 (ARRA), enacted in February 2009 (the 2009 Stimulus Act)

12. Federal ITC & PTC 2009 • The Federal Investment Tax Credit (ITC) • Federal business energy investment tax credit (ITC) is for qualifying equipment installed to produce renewable energy. • Credit Amount: Provides a 30 percent tax credit for the construction and installation of qualifying renewable energy facilities; 10 percent for geothermal, microturbines and combined heat and power (CHP). • Technology Types: Solar (including photovoltaic and solar thermal), small-scale wind, biomass, geothermal electric, fuel cells, geothermal heat pumps, CHP/Cogeneration, solar hybrid lighting, microturbines; now can extend to PTC technologies (i.e. large-scale wind) if elected.

13. Federal ITC & PTC 2009 • 2008-09 Changes to ITC • 8 year extension (2016) for solar and other technologies • PTC can be converted into ITC. • ITC can be converted to cash from Treasury. • ITC for fuel cells has been extended to 30 percent. • Small wind-energy systems, geothermal heat pumps, and CHP systems now qualify. • Utilities now qualify for ITC. • The ITC is no longer capped at $2,000 for residential solar systems.

14. Federal ITC & PTC 2009 • The Production Tax Credit (PTC) • The federal renewable electricity production tax credit (PTC) is a per-kilowatt-hour tax credit for electricity generated by qualified energy resources. • Qualifying Technologies: Wind, geothermal, biomass, hydrokinetic power (i.e., flowing water), tidal energy, wave energy, ocean thermal. • Credit Amount: 2.1¢/kWh for most (wind, geothermal, closed-loop biomass); 1.0¢/kWh for other eligible technologies. Generally applies to first 10 years of operation.

15. Federal ITC & PTC 2009 • Changes to the PTC • Can convert to ITC • Extended in-service deadlines for all qualifying renewable technologies. • Wind facilities (2.1¢/kWh) must be in service by Dec. 31, 2012. • Expanded list of qualifying resources to include marine and hydrokinetic resources, such as wave, tidal, current and ocean thermal. • Made changes to the definitions of several qualifying resources and facilities.

16. Federal ITC & PTC 2009 • U.S. Department of Treasury - Renewable Energy Grants • ARRA allows taxpayers eligible for the ITC and PTC to receive a grant from the U.S. Treasury Department instead of the ITC and PTC. • If an entity receives a grant and disposes of the project within 5 years, part or all of the grant will be recaptured. • The grant is not included in the gross income of the taxpayer; however ½ of grant reduces the depreciation basis of project.

17. Federal ITC & PTC 2009 • U.S. Department of Treasury - Renewable Energy Grants • ARRA allows taxpayers eligible for the ITC and PTC to receive a grant from the U.S. Treasury Department instead of the ITC and PTC. • If an entity receives a grant and disposes of the project within 5 years, part or all of the grant will be recaptured. • The grant is not included in the gross income of the taxpayer; however ½ of grant reduces the depreciation basis of project.

18. Federal ITC & PTC 2009 • U.S. Department of Treasury - Renewable Energy Grants • Only tax-paying entities are eligible for this grant. • The U.S. Treasury Department will make payment of the grant within 60 days of the grant application date or the date the property is placed in service, whichever is later.   • Treasury has not yet released guidelines and is not currently accepting applications for this grant. Guidelines are expected in spring or summer of 2009.

19. U.S. Department of Energy Loan Guarantee Program • The 2005 Innovative Technology Loan Guarantee Program • More than $10 billion in loan guarantees for energy efficiency, renewable energy and advanced transmission and distribution projects. • Under original authorization, loan guarantees were intended to encourage early commercial use of new or significantly improved technologies in energy projects. • However, not one single loan guarantee issued. • First loan guarantee approved on March 20, 2009 (Solyndra).

20. U.S. Department of Energy Loan Guarantee Program • The 2009 The Temporary Loan Guarantee Program • ARRA extended DOE authority to issue loan guarantees and appropriated $6 billion for the program, which translates into approximately $60 billion of potential lending. • DOE may now enter into guarantees until September 30, 2011. • Eligible projects now include renewable energy projects that generate electricity or thermal energy and facilities that manufacture related components, electric power transmission systems, and innovative biofuels projects.

21. Additional Stimulus Provisions • 2009 Manufacturing Tax Credit • ARRA established a new tax credit to encourage the development of a U.S.-based renewable manufacturing sector. • In any taxable year, the investment tax credit is equal to 30 percent of the qualified investment. • Investments must establish, re-equip or expand a manufacturing facility that produces equipment and/or technologies used to (1) produce renewable energy, (2) electric vehicles or components, (3) electric grid technologies, (4) to capture CO2, (5) refine/blend renewable fuels (6) to produce energy-conservation technologies or (7) other projects approved by DOE. .

22. Additional Stimulus Provisions . • Smart Grid & Dept. of Energy’s Office of Electricity Delivery and Energy Reliability • $4.5 billion for “electricity delivery and energy reliability.” • $4.3 billion likely to be dispersed to the Smart Grid Program, designed to support modernization of Nation’s electricity transmission. • Monies will be available through a grant of up to 50 percent for smart grid demonstration projects.

23. Additional Stimulus Provisions • Title IV of ARRA and Energy Efficiency • $3.2 billion for Energy Efficiency and Conservation Block Grants to cities and counties. • $5 billion to states for Dept. of Energy’s Weatherization Assistance Program for homes at or below 150 percent of the poverty level. • $3.1 billion to states for Dept. of Energy’s State Energy Program.

24. Conclusion