Renewable Energy Memo

May 30, 2011

Taylor English Duma Renewable Energy Blog

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September 4, 2010

Aaron Kowan Speaks on Renewable Energy Tax Credits

Filed under: Energy Blog,Uncategorized — admin @ 12:19 pm

Taylor English Attorney Aaron Kowan, spoke at the Reznick Group’s Real Estate and Renewable Energy Markets Forum at Lowe’s Hotel in Atlanta on August 24th.

Tax credits are a key element in many structured finance transactions involving real estate or renewable energy and Mr. Kowan’s practice focuses on ways to derive cash to fund project development from tax credits.

The Reznick Group is a national accounting firm that has been sponsoring symposiums on tax credit financings for several years. The meetings are generally attended by investors, project developers, bankers, accountants and lawyers looking for ways to structure financings for new projects.

Mr. Kowan is part of the renewable energy finance practice at Taylor English Duma which structures tax credit-driven financings for project developers, sponsors and investors.

March 11, 2010

Alternative Fuels Tax Credits Extended

The U.S. Senate yesterday voted by a margin of 82-36 to pass the American Workers, State and Business Relief Act, which included H.R. 4213.  That bill includes a one year extension of the biodiesel excise tax credit and the alternative fuel mixture credit.

Producers reacted with a sign of relief and reportedly have re-commenced or ramped up production in response to the news. 

For more background on the biodiesel and alternative fuel excise tax credits, please check out our recent podcast on Lexis-Nexis.

February 3, 2010

Administration Announces New Program to Promote Biofuels and Renewable Energy (RFS2; Carbon Sequestration; Biomass Crop Assistance Program)

President Obama today announced a series of steps as part of a comprehensive strategy to enhance American energy independence and build a foundation for a new clean energy economy. The administration believes that the strategy will create new industries and millions of jobs. (Reuters;  Reaction from Renewable Fuels Association).  At a meeting with a bipartisan group of governors,  the President set forth three efforts that he believes will work in concert to boost biofuels production and America’s dependence on foreign oil:

• The Environmental Protection Agency (EPA) has finalized a rule to implement the long-term renewable fuels standard of 36 billion gallons by 2022 established by Congress.

• The U.S. Department of Agriculture has proposed a rule on the Biomass Crop Assistance Program (BCAP) that would provide financing to increase the conversion of biomass to bioenergy. 

• The President’s Biofuels Interagency Working Group released its first report – Growing America’s Fuel. The report, authored by group co-chairs, Secretaries Vilsack and Chu, and Administrator Jackson, lays out a strategy to advance the development and commercialization of a sustainable biofuels industry to meet or exceed the nation’s biofuels targets. 

In addition, President Obama announced a Presidential Memorandum creating an Interagency Task Force on Carbon Capture and Storage to develop a comprehensive and coordinated federal strategy to speed the development and deployment of clean coal technologies. The U.S. will continue to rely on the availability and affordability of domestic coal for decades to meet its energy needs, and these advances are necessary to reduce pollution in the meantime.

The Presidential Memorandum calls for five to ten commercial demonstration projects to be up and running by 2016.

President Obama said, “Now, I happen to believe that we should pass a comprehensive energy and climate bill. It will make clean energy the profitable kind of energy, and the decision by other nations to do this is already giving their businesses a leg up on developing clean energy jobs and technologies. But even if you disagree on the threat posed by climate change, investing in clean energy jobs and businesses is still the right thing to do for our economy. Reducing our dependence on foreign oil is still the right thing to do for our security. We can’t afford to spin our wheels while the rest of the world speeds ahead.” 

“Advancing biomass and biofuel production holds the potential to create green jobs, which is one of the many ways the Obama Administration is working to rebuild and revitalize rural America,” said Agriculture Secretary Tom Vilsack. “Facilities that produce renewable fuel from biomass have to be designed, built and operated. Additionally, BCAP will stimulate biomass production and that will benefit producers and provide the materials necessary to generate clean energy and reduce carbon pollution.”

“President Obama and this Administration are strongly committed to the development of carbon capture and storage technology as a key part of the clean energy economy. We can and should lead the world in this technology and the jobs it can create,” said Energy Secretary Steven Chu. “The actions President Obama has taken today will create jobs, slash greenhouse gas emissions and increase our energy security while helping to put America at the leading edge of the new energy economy,” said EPA Administrator Lisa P. Jackson. “The renewable fuel standards will help bring new economic opportunity to millions of Americans, particularly in rural America. EPA is proud to be a part of the President’s effort to combat climate change and put Americans back to work – both through the new renewable fuel standards and through our co-chairmanship with the Department of Energy of the Interagency Task Force on Carbon Capture and Storage.”

December 21, 2009

Renewable Energy Around the Web: December 21, 2009

Our weekly compilation of renewable energy news and information from around the Web. 

Renewable Energy in Scotland

A report from the Scottish National Heritage organization claims that Scotland is on target to exceeds its renewable energy goals and could achieve 300% of its goals by 2020 if pending programs are approved.  The report claims that 2,834 MW of renewable power is operational and another 3,739 MW of power has been approved with another 19,500 MW in the planning stages.  The combined output is more than three times the 8 GW need to meet Scotland’s 2020 target of 50% of electricity from renewables. 

Utilities Building Long Distance Transmission Lines

The California PUC gave its final approval for Southern California Edison to construct the last 173 miles of its 250-mile Tehachapi transmission project in Kern County.  The line is expected to transmit as much as 4,500 megawatts of electricity produced from wind, enough power for nearly 3 million homes.

The capital cost of high-capacity long distance transmission is often seen as a barrier to the development of renewable energy production because the cost can be so high and the time to delivery can take years.

In a related development, LS Power announced that it would build the LaSalle Transmission Project (“LaSalle”), a new 345 kilovolt (kV) transmission project connecting Illinois and Indiana. The project is intended to facilitate renewable energy development within the region.

LaSalle is expected to be an approximately 160-mile transmission line to connect three existing 345-kV substations operated by the PJM Regional Transmission Operator. These three substations are the Pontiac-Midpoint substation near Pontiac, Illinois; the Reynolds substation near Reynolds, Indiana; and the Dumont substation near North Liberty, Indiana. New substations may also be constructed along the transmission line to serve as points where additional wind could interconnect to the transmission system.

“LaSalle will be routed through some of the most promising areas in Illinois and Indiana for wind development – areas that currently have limited access to the high-voltage transmission system,” stated Sharon K. Segner, Director – Project Development with LS Power. “LaSalle will provide both a means for wind generation to connect to the transmission system and an outlet for the wind generation to be delivered to load.”

The project is being developed by Central Transmission, LLC, a new transmission company and member of the LS Power Group. The LS Power Group has active transmission development across the country representing over 1,000 miles of transmission planned to help deliver renewable resources to load. This includes Great Basin Transmission, a new transmission company in Idaho and Nevada developing a “shovel ready” 500+ mile 500-kV transmission line; and Cross Texas Transmission, a new transmission company in Texas developing over 200 miles of double circuit 345 kV as part of the Competitive Renewable Energy Zone Transmission Plan.

Renewable Energy Committee Studies State Incentives

The Renewable Energy Committee of the American Bar Association’s Public Utility Section is conducting a study of state-level incentives for renewable energy.  The Committee’s Fall 2009 Report outlined the key federal incentives and for its Spring 2010 Report the Committee will dig deeper into the incentives available at the state level.  Created by the Public Utility Section in 2009, the Renewable Energy Committee has nearly 100 members and brings together legal practicioners to study developments in the sector.

New Landfill Methane Plant in North Carolina

Methane Power announced the opening of a new landfill gas-to-energy plant in Durham, NC, the state’s fourth largest city.  Electricity generated by the Durham landfill energy plant is being sold to Duke Energy Carolinas under a power purchase agreement.

Methane Power Inc., the project developer, said the energy plant is powered by three of GE’s containerized JGC 320 Jenbacher landfill gas engines. GE’s Jenbacher landfill gas engines are generating 3.17 megawatts of renewable electricity for the regional grid by using the landfill’s methane gas, which is created by the decomposition of municipal solid waste. The facility is generating enough energy to support about 1,800 North Carolina homes.

North Carolina is one of 27 states with a renewable portfolio standard (RPS), which requires utilities to produce a certain percentage of electricity from renewable sources, including biogas. North Carolina’s RPS requires that by 2021, utilities must meet 12.5 percent of customers’ energy needs through energy efficiency savings or renewable energy production.

Copenhagen’s Effect on Renewable Energy

Will the recently-announced climate change deal at Copenhagen have an effect on the market for renewable power?  The popular investing blog, SeekingAlpha, things so.  SeekingAlpha writes:

“The result from Copenhagen boosted the renewable energy outlook; India’s Suzlon sees wind turbines shortfall in 2010 and in the coming years. The $53B wind turbine market means the current global capacity cannot meet the demand.”

“The wind energy market is heating up in China as well. Ealier this year General Electric set a joint venture with A-Power Energy Generation with an annual 2GW capacity in 2010. According to the CEO, GE sees China as leading the green energy trend already, and this will continue if the U.S. does not come up with a green energy policy. A-Power Energy Generation announced Wednesday that the company has signed a definitive agreement with US-REG and Cielo wind for a Texas 600MW wind farm project. ”

“Before this announcement, some investors were still skeptical. What makes this project golden is that A-Power has agreed to deliver wind turbines beginning in March 2010. In other words, revenue on wind turbines will starts to flow in Q1 of 2010. Of course, the company has already realized revenue from Chinese wind farms in Q4 2009, however this marks the first revenue in-flow from a Mega wind farm project that A-Power has signed. The company has many huge alternative energy projects from various countries and is ramping up its turbine projects quickly through a Joint venture with General Electric.”

On the other hand, most environmental activists have viewed Copenhagen as a bust, so any boost for renewables is likely less than would have been the result if world leaders had adopted a wider-reaching or more robust agreement. 

In that same vein, on the first tradng day after the Copenhagen announcement, the price of carbon trading permits in Europe fell, reflecting the decreased likelihood of restrictions on carbon emissions.  Bloomberg reported that the “nations attending the two-week Copenhagen summit that ended at the weekend agreed to voluntary, rather than binding, targets to reduce emissions. The accord isn’t enough to boost demand for permits, said Trevor Sikorski, an emissions analyst at Barclays Capital in London.”

November 11, 2009

Health Care Bill Cuts Biofuel Tax Credits

A provision in the health care bill passed by the House of Representatives over the past weekend (H.R. 3962) would cut the tax credits currently benefitting cellulosic ethanol and other biofuel tax producers.

Section 555 of the bill excludes from the cellulosic biofuel producer credit (under Section 40(b)(6) of the Internal Revenue Code) any fuel that (a) consists of more than 4% water and sediment or (b) consists of more than 1% ash. 

In an attempt to generate revenues to pay for the costs of expanded health care, the House bill eliminated tax credit provisions that are expected to return $24 billion to the U.S. Treasury over the next 10 years.  Members of the House from Midwestern and other farm states who voted in favor of the bill have already staked out positions in favor of eliminating the tax credit cut in the final version of the health care bill.

October 8, 2009

Qteros Makes Breakthrough Announcement on Ethanol from MSW

Filed under: Biofuels,Energy Blog — Tags: — Jonathan B. Wilson @ 8:01 am

Biofuels innovator Qteros and Applied Clean Tech  have announced a breakthrough in ethanol development from municipal solid waste, according to Biofuels Digest

Recyllose™, a recycled solids-based material produced from municipal wastewater, can now be turned into fuel for cars, announced Applied Cleantech and Qteros, the advanced biofuels company wh claims to be able to turn biomass into cellulosic ethanol through its proprietary Q Microbe™ technology.

Qteros has entered into a joint development project with Applied CleanTech (ACT), a commodities recycling company based in Israel, to use ACT’s Recyllose™-based feedstock, produced from municipal wastewater solids, for even more efficient and low-cost ethanol production. ACT’s recycling system treats wastewater solids, producing high-quality alternative energy sources for the production of electricity or ethanol, while reducing sludge formation and lowering wastewater treatment plant costs and increasing plant capacity.

The companies said they are the first to demonstrate commercial success in creating ethanol from the cellulose in municipal and agricultural liquid waste, and to offer a process that all municipalities can use to help reduce expenses.

“Our customer is every municipality that has a wastewater treatment plant,” said Jeff Hausthor, Qteros co-founder and senior project manager. “It will provide a value-added product for municipal wastewater plants, thereby making treatment plants much less expensive to run and helping local governments throughout the world with their constrained budgets.”

Israel Biran, ACT’s CEO, added, “It also helps answer the question of what municipalities can do with their sewage sludge, a major challenge now facing every wastewater treatment plant operator.”

By using ACT’s proprietary feedstock, Hausthor said Qteros and ACT’s researchers have found that an ethanol production plant can produce 120–135 gallons of ethanol per ton of Recyllose™.

Since Recyllose™ is low in lignin (a major component of plant cell walls that is difficult to degrade), and lignin can be inhibitory to efficient conversion to ethanol, Hausthor said the material improves cellulosic plant operational efficiency  20 percent over higher lignin content feedstocks.

Qteros’ CEO William Frey said that with previous technologies, a cellulosic ethanol plant would have to produce roughly 20-30 million gallons per year (MGY) in order to be profitable. With the proposed Qteros-ACT process, Frey said, production with these economics could be viable at a smaller scale.

ACT President Dr. Refael Aharon said that a wastewater plant that handles 150 million gallons a day (serving a population of about 2 million people) can be sufficient to supply a smaller-scale ethanol plant with cellulose.

Qteros and ACT said that by applying the proprietary one-step Qteros fermentation technology to ACT’s Recyllose™ feedstock, they have achieved a high-yield, waste-to-ethanol production process that is superior to other industrial-scale processes both technically and economically.

The research has been supported in part by a grant from the Binational Industrial Research and Development (BIRD) Foundation. The BIRD Foundation funds joint efforts between Israel and the United States, and their financial support has resulted in the very successful collaboration of Qteros’ and ACT’s technologies.

The U.S. government has set a goal of increasing annual production of alternative fuels like ethanol from today’s 10 billion gallons to 36 billion gallons by 2022. Qteros predicts that this announcement will move the country one step closer to realizing its goal. “Ethanol is the best next-generation fuel,” said Frey.

October 2, 2009

Gevo Offers Biobutanol Retrofits for Ethanol Producers

Biofuels Digest reports that Gevo has launched a 1 MGY biobutanol plant in St. Joseph, Missouri.

Butanol is formed through fermentation, like ethanol, but has a higher energy value and a lower vaporization profile.  This makes butanol an ideal drop-in fuel for existing gasoline vehicles or as a supplement to biodiesel.

Gevo has also announced the formation of Gevo Development to develop a fleet of biorefineries based on converting existing ethanol plants to Gevo’s proprietary technology for biobutanol.  The new company will be managed by Mike Slaney and David Black, who co-founded and raised over $430 million to capitalize ASABiofuels. In August, 2007, VeraSun Energy Corporation acquired ASAB, its three ethanol production facilities (totaling 300 million gallons per year of ethanol capacity) and three development sites for $725 million.

Gevo CEO Pat Gruber said that the “Gevo Development’s business model is open — it will include acquisitions, joint ventures and tolling arrangements providing flexibility to existing owners and lenders.”

September 30, 2009

An Asset-Backed Solution for Renewable Project Finance

Filed under: Biofuels,CleanTech investing,Energy Blog — Tags: , — Jonathan B. Wilson @ 6:33 am

Our friends at Biofuels Digest have offered a modest proposal for the problem of finding funding for biofuels and bioenergy projects: asset-backed securities. 

It would work by having a bank loan funds to a project.  The bank would then pool its loan with other renewable energy loans from other banks.  A finance company (either newly-formed or perhaps government-backed) with then issue securities to investors that represent a participation in the performance of the pool of loans.  Banks participating in the pooling process would be required to pay a premium into a insurance-like fund that, in turn, would guarantee a portion of the loans.

It’s a creative approach and one that we would support if it were available, but as it’s describe it would require an act of Congress (quite literally) to get off the ground.  A public-financed securitization vehicle, like Fannie Mae and Freddie Mac for mortgages, can only be created by Congressional authorization.

There is a private market solution, however, but it would still require the participation of a number of sizeable funds.  It would be possible for a group of funds or some very well-financed investors to form a holding company that could buy pools of renewable energy loans and then sell publicly-traded securities that represent participation interests in those loans.  The holding company would likely be covered by the Investment Company Act and investors buying securities in the process would have an experience similar to that of a standard mutual fund. 

All that would be required is the financial backing and the leadership to bring such an entity into existence.

September 28, 2009

Renewable Energy Around the Web: September 28, 2009

Our weekly compilation of renewable energy news and information from around the Web.

The Saudi Arabia of Biomass

Is North Dakota the Saudi Arabia of Biomass?  It was Shane Goettle, commissioner of the North Dakota Department of Commerce who used this colorful term to describe the state at a the Norther Plains Bioeconomy Conference on September 22 in Fargo, N.D.  Goettle said the state leads the nation in biomass production capacity and is the top producer of 16 different commodities. 

Goettle said that the state has several energy assets, including the largest deposit of lignite coal in the world, the fifth largest oil production state in the nation, and the leader in the nation of wind energy potential. “You would be heavy pressed to find a state that is more readily poised to engage in the country’s energy future,” he said. “The fact that we have such tremendous biomass potential is getting the attention of significant investors, companies and players in the world.”

The North Dakota legislature has created EmPower ND, a statewide energy policy commission to build on a comprehensive energy policy for North Dakota.

The goal of of EmPower ND is to grow all energy industries in the state—renewable and traditional. Goettle said the program is unique in nature. “We’ve got all of the energy industry leaders together to hammer out a policy they we can initially agree on, and go to the legislature and our government leaders to move all of North Dakota’s energy interests forward. It’s not easy work, but I’m very proud of this 14-member commission.”

So far, during 2009 the North Dakota legislature has passed nine pieces of energy legislation supported by EmPower, including tax breaks for renewable energy devices, income tax credits for soybean and canola crushing costs, a combined renewable energy and biomass incentive programs with $3 million in funding, and a biofuels blender pump incentive program with up to $2 million in funding.

Political Favors?

The Wall Street Journal reported last week that Fisker Automotive Inc., a start-up company based in California, will receive a $529 million government loan to build an $89,000 hybrid vehicle in Finland.  The announcement  follows a $465 million government loan to Tesla Motors Inc., which is hoping to manufacture a $109,000 British-built electric Roadster. Tesla is a California startup focusing on all-electric vehicles, with a number of celebrity endorsements that is backed by investors that have contributed to Democratic campaigns.  Fisker is reportedly backed by Al Gore.

The awards to Fisker and Tesla have prompted concern from companies that have had their bids for loans rejected, and criticism from groups that question why vehicles aimed at the wealthiest customers are getting loans subsidized by taxpayers.

“This is not for average Americans,” said Leslie Paige, a spokeswoman for Citizens Against Government Waste, an anti-tax group in Washington. “This is for people to put something in their driveway that is a conversation piece. It’s status symbol thing.”

DOE officials spent months working with Fisker on its application, touring its Irvine, Calif., and Pontiac, Mich., facilities and test-driving prototypes.  Matt Rogers, who oversees the department’s loan programs as a senior adviser to Energy Secretary Steven Chu, said Fisker was awarded the loan after a “detailed technical review” that concluded the company could eventually deliver a highly fuel-efficient hybrid car to a mass audience. Fisker said most of its DOE loan will be used to finance U.S. production of a $40,000 family sedan that has yet to be designed.

Subsidies for Non-Renewable Fuels?

Biodiesel Magazine is reporting that a recent study by the Environmental Law Institute concluded that existing subsidies for fossil fuels provide twice the value in governmental incentives to fossile fuels than to renewable fuels.  The study claims that fossil fuels benefited from approximately $72 billion over the seven-year study period, while subsidies for renewable fuels totaled only $29 billion. More than half the subsidies for renewables—$16.8 billion—were attributable to corn-based ethanol. Of the fossil fuel subsidies, $70.2 billion went to traditional sources—such as coal and oil—and $2.3 billion went to carbon capture and storage, which is designed to reduce greenhouse gas emissions from coal-fired power plants. The focus of the study was that these energy subsidies  favored energy sources that emit higher levels of greenhouse gases over sources that emit fewer greenhouse gases.

Cash is King

Popular investing website, Seeking Alpha, carried a lengthy report on the economics of renewable energy investing.  Among its findings:

  • It is a “buyer’s market” for those developing large wind, solar, bioenergy, biofuel, and other renewable energy projects. In 2009, land is less expensive, equipment cost less, deliveries are faster, and warranties longer. It is a buyer’s market if you have cash, yet it continues to be a difficult time to secure debt financing.
  • Demand for renewable energy is at a record high as U.S. utilities in about 30 states struggle to meet renewable portfolio standards (“RPS”).
  • Utilities in RPS states are looking to sign long term PPAs (“power purchase agreements’) for 5 to 20 years.
  • Renewable energy has been an “historic opportunity” for developers who would take projects through 3 to five years of analysis, regulatory approvals, securing equity and debt financing, buying equipment, program management, and operating the plant. Now, few investors and lenders have the appetite for risk, as projects such as ethanol plants have gone bankrupt.
  • Credit worthiness of developers, utilities and end users are scrutinized. For example, major public real estate owners of buildings, hotels, and shopping centers that want MW of solar cannot get the RE because their corporation or REIT has a sub-prime debt rating.
  • Risk is intensified as redundant regulation and NIMBY (not in my backyard) opposition can delay installation of high-voltage lines for 7 to 10 years from wind or solar farm to major cities that need more electricity. Even billionaire Boone Pickens was unwilling to tie-up money for that period of time.
  • Although large-scale RE development in 2009 is beyond the financing capabilities of most entrepreneurs, it is an opportunity for major public companies with investment-grade bond ratings such as FPL Energy (FPL), GE Energy (GE), Iberdrola Renovables (IBR.MC), and EDF Energy Nouvelles (EEN.PA). Wall Street analysts are forecasting record 2009 and 2010 earnings for Iberdrola and EDF.
  • Smaller wind and solar developers find that new developments are possible, though more difficult. Utilities are standardizing RFPs and making conditions more reasonable. Private equity money is available if investors can be convinced of high returns and low risk. David Perlman, Managing Director with investment banker Fieldstone Private Capital Group, reports that, “Liquidity is returning, but with fewer banks than before economic crisis, smaller lending commitments, shorter maturities, and club deals rather than syndications. Bankers might offer construction terms and an operating loan of no more than five years for developments that show little risk.
  • The ARRA (American Recovery and Reinvestment Act) has helped and hurt. More federal bureaucracy and slower release of money is reported. New wind and solar deals are more likely to use ITC than PTC. The cash flow for an ITC is sooner and more predictable. For many projects, the new Treasury Department Grant is even more favorable than ITC. Tax-exempt bonds are another avenue for financing RE projects reported John M. May, Managing Director of investment banker Stern Brothers. He identifies bioenergy and biofuel from solid waste are good targets for tax-exempt bonds.
  • The demand is growing for renewable energy and fuels. The rewards are significant for the patient investor who can moderate risk with a portfolio of RE projects at various stages of approval. In 2009, the year of the Great Recession, cash is king.
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