In the News
Solar and wind companies are plotting strategies to extend the life of a popular federal renewable energy grant program after it expires at the end of the year.
The renewable energy grant-in-lieu of tax credit — or 1603 — program in the American Recovery and Reinvestment Act provides 30 percent of the cost of a renewable energy project to a project owner as soon as it’s completed.
The grant replaces a federal tax credit in place through 2016, and it’s been a lifeline for many renewable energy developers that weren’t able to secure extremely limited tax equity financing throughout the downturn to collect the tax credit.
“There are groups of solar players who, without the grant, are dead in the water,” said Adam Boucher, CEO of Adam Capital, which loans money to small and midsized solar developers that is typically paid back with the federal grant.
Yet, the Safe Harbor provision in the grant program allows developers to collect the grant beyond the Dec. 31 expiration date if they can demonstrate “significant construction” on the project, or if they’ve spent more than 5 percent of the project’s cost prior to Dec. 31.
Developers, including San Francisco-based Tioga Energy , are stockpiling solar equipment now that they can apply to projects through 2013 that would make their projects eligible for the grant.
“We’ve got access to capital that doesn’t need the 1603 (grant),” said Tioga CEO Paul Detering. “But some of our capital (sources) need it or would like to use it. So we’re going to grandfather in some projects.”
Understanding how the U.S. Treasury Department will apply the Safe Harbor provision has not been easy, since language in the provision is “fairly ambiguous,” Detering said. And scores of attorneys and accountants — including many who represent the Bay Area’s developers — have been on conference calls hosted by the Treasury Department in recent weeks trying to get clarity on the Safe Harbor provision, several sources have confirmed.
Sonoma-based Adam Capital Inc. sees an opportunity in the Safe Harbor provision. Adam Capital this year loaned $26 million to seven small and midsized renewable energy developers — most of whom didn’t have access to tax equity financing — buoying those firms until they could collect the federal grant. Now Adam Capital, in addition to loaning money to developers, plans to own solar and solar hot water projects through other entities and meanwhile, it’s stockpiling solar equipment.
“For our borrowers, we’re setting up a safe harbor and are going to provide that equipment to them and that equipment will allow them to qualify for the (grant),” Boucher said.