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Columbus Green Building Forum

Green Financing – Renewable Energy

April 14, 2010 Columbus, OH

Toby RittnerPresident & CEO

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About CDFA National non-profit association representing the

development finance industry.

Provide education, advocacy, research, networking and leadership.

Training Institute – Bond Finance (2), Tax Increment Finance (2), Tax Credit, Revolving Loan Fund Finance, Innovation Finance and Fundamentals of ED Finance Course.

New Energy Finance Course coming in October 2010.

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About CDFA Research – Produce annual State-By-State studies for

Bond Volume Cap and Tax Increment Finance Statute changes.

Resources – Over 5000 resources online through our Bond, TIF, Tax Credit and RLF libraries.

Advocacy – Active partner with Congress and Administration and had 3 items in the 2009 stimulus bill.

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UnderstandingDevelopment Finance & Why it is Important to Renewable

Energy Financing

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What is Development Finance? Development finance is the efforts of local communities

to support, encourage and catalyze economic growth through public/private investment in physical development, redevelopment, business and industry.

It is the act of contributing to a project/deal that causes that project/deal to materialize in a manner that benefits the long term health of the community.

Development finance requires programs and solutions to challenges that the local environment creates.

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What Does DF Include? Debt, equity, credits, liabilities, remediation, guarantees,

collateral, credit enhancement, venture/seed capital, early stage, workforce, technical assistance, planning, short-term, long-term, incentives, gap, etc.

Proactive approaches that leverage public resources to solve the needs of business, industry, developers and investors.

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Why is DF Important? Businesses need working capital and the ability to invest

in themselves.

Developers need assistance to achieve an acceptable ROI.

Communities need infrastructure and amenities.

Citizens need opportunities for advancement – jobs, small business, education, etc..

Regions need economic prosperity.

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Finance Agencies Role Economic developers are the bridge between

government and business and often direct the use of development finance tools.

Cities, counties, states and the federal government all operate financing agencies that fill this role.

What does this have to do with renewable energy finance?

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Finance Agencies Role Development finance agencies offer a variety of financing

resources for supporting renewable energy projects?

Bond Financing

Loan & Grant Programs

Incentives & Credits

Special District Financing

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Bond Financing Bond financing is the oldest form of public finance and

has been used in the U.S. for nearly 100 years.

A bond is essentially a loan. The borrower (public or private) borrows money to finance a project from the sale of bonds which generates cash. The borrow pays back the loans over time to bondholders. Bondholders earn interest on their investment in the bond.

The federal government authorizes a variety of bond financing mechanisms to assist with energy, industrial, transportation and government development.

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Sample Programs New Clean Renewable Energy Bonds (New CREBs) –

Tax credit bond tool that allows government bodies, cooperative electric companies and clean renewable energy bond lenders to issue debt for financing energy projects.

Investment can be in a variety of renewable energy projects and is a partnership between public and private parties.

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Sample Programs Qualified Energy Conservation Bonds (QECBs) –

Very broad bond financing tool that allows for public private partnerships in the financing of facilities that conserve energy or reduce consumption of energy.

70% of project must be a public use and up to 30% for private use.

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Loan & Grant Programs Over the past decade, loan & grants programs have

developed within both state and federal government.

Today, dozens of programs exist to assist with both corporate or personal energy consumption, production, investment and generation.

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Loan & Grant Programs U.S. Department of Energy Loan Guarantee Program –

Allows DOE to provide loan guarantees to commercial, industrial, nonprofit, schools, state & local government, agricultural, institutional, any non-federal entity, and manufacturing facilities for projects that "avoid, reduce or sequester air pollutants or anthropogenic emissions of greenhouse gases; and employ new or significantly improved technologies as compared to commercial technologies in service in the United States at the time the guarantee is issued”.

Project must be $25 million or above

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Loan & Grant Programs USDA - Rural Energy for America Program (REAP)

Loan Guarantees & Grants – Provides grants or loans for protects that promote energy efficiency and renewable energy for agricultural producers and rural small businesses

U.S. Department of Treasury Renewable Energy Grants – Provides grants of up to 30% of property that is part of a qualified facility, qualified fuel cell property, solar property, or qualified small wind property, 10% of all other property

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Incentives & Credits Federal and state governments provide a variety of

incentives and tax credits to support the development of and investment in renewable energy.

These incentives & credits can often be used for energy production, generation, investment, new technology, advanced technology, retrofitting, energy efficiency, etc.

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Sample Programs Business Energy Investment Tax Credit – 30% corporate

tax credit for solar, fuel cells and small wind, 10% corporate tax credit for geothermal, microturbines and other uses

Energy-Efficient New Homes Tax Credit for Home Builders - $1,000 - $2,000 (depends on energy savings and home type)

Renewable Electricity Production Tax Credit (PTC) - 2.1¢/kWh for wind, geothermal, closed-loop biomass; 1.1¢/kWh for other eligible technologies. Generally applies to first 10 years of operation.

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Sample Programs Renewable Energy Production Incentive (REPI) -

2.1¢/kWh (subject to availability of annual appropriations in each federal fiscal year of operation)

Wind Energy Credits – 1.5 cents per kilowatt-hour for power produced by wind turbines

Qualifying Advanced Energy Manufacturing Investment Tax Credit - 30% of qualified investment

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Sample Programs Residential Energy Efficiency Tax Credit - 30% of

qualified investment

Residential Renewable Energy Tax Credit - 30% of qualified investment

Energy-Efficient Commercial Buildings Tax Deduction - $0.30-$1.80 per square foot, depending on technology and amount of energy reduction

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Special District Financing 49 states and the District of Columbia offer some type of

special district financing.

Often called tax increment financing (TIF), this tools has been modified in recent years to address energy development.

Today a variety of special assessment based special district financing tools exist to support residential, commercial and industrial renewable energy development.

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PACE Program The Property Assessed Clean Energy (“PACE”)

program is a version of this approach with special bonds issued to finance the development.

Certain states have enacted legislation to enable clean energy improvement districts (the “CE Improvement Districts”) to finance the installation of certain approved clean energy equipment for residential and commercial properties.

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PACE Program The installation of said equipment will be financed by

individual property owners who opt in to the program through special property tax assessments on their properties that amortize over periods no greater than 20 years.

PACE Bonds are issued and secured by a pledge of the Special Property Tax Assessments collections.

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Ohio’s Solar SID Program Ohio’s Solar Special Improvement District (SID) is an

example of this new type of financing structure.

David Rogers, Partner, Bricker & Eckler LLP in Columbus, OH will explain how the New CREBS, QECBs and Solar SID programs work.

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CDFA Research & Resources CDFA website: www.cdfa.net

Development Finance ReviewWeekly e-newsletter

Online Resource Database

Online Resource Libraries: Bond Finance Tax Credit Finance Tax Increment Finance Revolving Loan Funds Energy Finance

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Contact CDFA

Toby Rittner, EDFPPresident & CEO

Council of Development Finance Agencies815 Superior Ave., Suite 1301

Cleveland, OH 44113(216) 920-3072

trittner@cdfa.net