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May 30, 2011

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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.

August 20, 2009

White Paper on Qualified Advanced Energy Project Tax Credits

As previously reported, the Department of Energy and the Treasury Department recently issued joint guidance on the application process for Qualified Advanced Energy Project (“QAEP”) tax credits.  We have published a white paper on the application process that is available on the Research page. 

Initial applications are due by September 14, 2009.

Please contact us at Editor(at) if you have specific questions on the application process.

July 31, 2009

DoE Announces $8.5 Billion in Loan Guarantees Available

The Department of Energy has announced that it is now ready to accept applications for up to $8.5 billion in renewable energy loan guarantees. 

Energy Secretary Steve Chu said, “These investments will be used to create jobs, spur the development of innovative clean energy technologies, and help ensure a smart, strong and secure grid that will deliver renewable power more effectively and reliably.  This administration has set a goal of doubling renewable electricity generation over the next three years.  To achieve that goal, we need to accelerate renewable project development by ensuring access to capital for advanced technology projects.  We also need a grid that can move clean energy from the places it can be produced to the places where it can be used and that can integrate variable sources of power, like wind and solar.”

Application information from the Department of Energy is available here.

July 30, 2009

New Energy Jobs Slow to Bloom

The Miami Herald trumpeted in a headline yesterday, “Despite federal aid, new energy jobs slow to bloom.”  The article claims that the recession has hit the renewable energy space just like the rest of the economy, so renewable companies are slow to hire.

That’s true, of course, but it’s not the whole story.  Despite the unprecedented level of support given for renewables through the 2009 Recovery Act, including the Section 48 Investment Tax Credit and the extension of the biofuel excise tax credits, this kind of support is not enough for projects to get off the ground.  Any developer looking to break ground on a new project still needs cash to bring the project online.

The expanded role of the Department of Energy and the Department of Agriculture in issuing guarantees for qualified renewable energy projects was supposed to be the catalyst that would bring renewable projects into fruition faster, but these programs have been painfully slow in coming.  While DoE and DoA grants and guarantees are helpful, a project developer still needs to raise a substantial amount of cash equity to take advantage of them, only to then proceed through the guarantee application process.

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