Production Tax Credits (PTC) and Investment Tax Credits (ITC) for the renewable energy industry have received a lot of press in recent weeks, as pressure builds in Washington to extend these valuable incentives, which are set to expire at the end of the year.
A lesser-known incentive program, Clean Renewable Energy Bonds (CREBs), will also expire on December 31, if Congress fails to act.
CREBs, which were created by Congress in the Energy Policy Act of 2005, are the kid brother in the Tax Credit Family – they are designed to provide incentives for electric cooperatives and other not-for-profit utilities to invest in renewable generation resources.
Comparable to the PTCs available to investor-owned utilities, CREBs were created to make renewable energy projects more affordable to rural communities served by electric cooperatives and public power systems. Essentially they function as interest-free loans for institutions developing the projects, because bondholders receive a tax credit in lieu of interest payments.
The U.S. Treasury Department authorized $1.2 billion in CREBs through December 31, 2008, with $450 million reserved for cooperatives like the Sulphur Springs Valley Electric Cooperative in Willcox, Arizona, which is using $11.5 million of the bonds to finance the construction of solar photovoltaic systems at 40 schools in the communities it serves.
Another CREB recipient, the East Kentucky Power Cooperative (EKPC), was one of the state’s first power suppliers to bring landfill gas-produced power online. EKPC received $8.6 million to fund four landfill gas development projects, which will generate between 1.6 and 4 megawatts of electricity each.
"The nation’s exponential increase in the demand for energy, which is expected to grow by 39% by 2030, along with the push to reduce greenhouse gas emissions only enhances the value of CREBs financing," says James M. Andrew, administrator of the Rural Utilities Service at the U.S. Department of Agriculture. "Given that rural electric cooperatives serve 12% of the U.S. population, their investment in renewable energy is very important."
Last week the Internal Revenue Service (IRS) announced 312 projects eligible to be financed with $406 million from bonds under the CREB program. The allocations range from $15,000 to $30 million and are set aside for 139 solar energy facilities, 102 wind power installations, 45 landfill gas facilities, 18 hydropower plants, 5 biomass power plants, and 3 trash combustion facilities.
The IRS selected the projects from among 342 applications, requesting a total of $898 million. A previous round of $800 million was allocated in November 2006.
The National Rural Utilities Cooperative Finance Corporation (NRUCFC) is a not-for-profit finance cooperative that obtains CREB allocations for its member rural utility systems. According to the NRUCFC, 78 electric cooperative projects in 22 states have received bond allocations to date, and by 2010, electric cooperatives plan to increase by 50% their owned, non-hydro renewable capacity with wind, biomass, small hydro, solar and other renewable energy projects.
NRCFC said it has received approval for 65 CREB allocations, totaling more than $314 million in potential renewable energy projects. So far, roughly $31 million of that total has been issued to launch 27 renewable energy projects in Arizona, Indiana, Kentucky, Minnesota and Vermont.
"CREBs are helping power renewable energy generation among electric co-ops," said Sheldon C. Petersen, CEO of NRUCFC. "Our members’ positive response to the CREBs program demonstrates their commitment to develop alternative energy sources while continuing to provide affordable, reliable electricity."
The House of Representatives says they will take up legislation after the Presidents’ Day recess that would extend tax credits for renewable energy, while repealing them for big oil companies.
A measure to do just that was defeated in the Senate last December.
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