The government released some details on its plan to grant big blocks of cash to renewable project developers today.
Project developers can apply for cash grants worth 10-30% of the cost of a project from the Treasury by the end of the month. The project must be under construction or in service, which means property for the project is ready and available for its specific use.
The developer will receive its money 60 days after their application is submitted, so long as the application is approved.
The program lasts three years. The last chance to apply is October 1, 2011.
This is part of the stimulus. Previously, the government made 10-30% of the project costs available as tax credits. The tax credit plan is a hold over from policies that date back to the Carter administration.
At the time Carter, couldn’t just cut checks for renewable energy, so he created the tax incentive. The problem with a tax incentive is that many renewable energy companies don’t earn any income at first, so they don’t have taxes to pay. As a result, the tax incentive did nothing for them. They wound up connecting with investment banks to build their projects and take advantage of the tax credits. When Wall Street fell apart last fall, the renewable projects were screwed. (See this excellent Atlantic article for more information.)
The program will provide a welcome source of financing for renewable projects struggling with tight credit markets, but FBR Capital released a note this afternoon reiterating that it doesn’t see this program helping a great deal this year.
The Treasury and DOE estimate that the project will cost around $3 billion, but there is no cap on spending. So it could be worth $10-14 billion, it all depends on how many projects are built.
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