DOE Doles Out $503M for Wind, Solar Projects — Will Investors Follow?

doe-logoA dozen wind and solar projects have just snagged hefty grants from the Department of Energy — not enough to cover the entirety of their projects, but enough, the agency hopes, to get investors to pony up more capital. Among today’s big winners is Spain’s Iberdrola Renewables, snagging close to $300 million of the nearly $503 million announced today. Iberdrola’s PeƱascal Wind Farm in Sarita, Tex. won the largest single grant in today’s group, for more than $114 million.
The idea of these grants, provided under the stimulus package, is to award cash up front in lieu of tax credits, helping to spur private investment and keep clean energy developers from getting stuck in the chicken-and-egg funding dilemma of having to bring a project online before tax credits kick in.

In its announcement about the grant winners today, the Obama administration highlights that it has made this first round of awards in just 30 days — half of the required turnaround time. This echoes the administration’s message in July, when the government released guidelines for the grants: The Treasury Department’s Michael Mundaca, Acting Assistant Secretary for Tax Policy, said in a call with reporters, “We’re trying to get as much information out as quickly as possible.”
But for many energy developers, the program, meant to monetize the existing production and investment tax credit programs, has been unfolding too slowly. Solar Energy Industries Association President and CEO Rhone Resch called on Congress this summer to issue a one-year extension of the “sunset-date” for the program in order to make up for the Treasury’s delays in releasing rules that would let companies — and potential investors — figure out if their projects are likely to be eligible for the grants, and how much financing they need to secure from other sources.
As it stands now, projects have to be up and running in 2009 or 2010 to qualify for the grants. Other hurdles remain for developers even if they meet the deadline and snag stimulus funds. Grant winners still have to cover the remainder of project costs, and (as the Wall Street Journal’s Environmental Capital blog points out), deal with the basic task of lining up customers for electricity that’s often still pricier than power from conventional fossil fuels.
The American Wind Energy Association, however, sees reason for optimism. In a statement about today’s awards, the group’s Senior Vice President for Public Policy, Rob Gramlish, said, “For these grantees and many other projects that are preparing their applications, we are seeing business activity picking up and turbine parts orders being sent all the way up the value chain…it is very encouraging to see this turnaround underway.” For now, the clock is ticking for other projects hoping to get a boost from these grants.