Advanced energy finance is an ever-expanding field with many players, including government agencies, private investors, and international financial institutions. Our periodic Finance updates will help you understand and navigate this complex infrastructure. Read previous energy finance updates here.

DOE Issues Draft Innovative Renewable Energy and Energy Efficiency Solicitation; Up to $4 billion in Loan Guarantees to be made Available

The U.S. Department of Energy last month issued a draft solicitation for loan guarantees for innovative renewable energy and energy efficiency projects to help commercialize technologies that may be otherwise unable to obtain full commercial financing. When finalized, the solicitation is expected to make as much as $4 billion in guarantees available for U.S.-based projects.

The solicitation is intended to support technologies that are catalytic, replicable, and market ready. While any project that meets DOE’s requirements is eligible to apply, DOE has identified five key technology areas of interest: advanced grid integration and storage; drop-in biofuels; waste-to-energy; enhancement of existing facilities; and efficiency improvements. The draft solicitation is now open for an initial 30-day public comment period, and DOE is also hosting public meetings this month in the Twin Cities, Stanford, and Cambridge.

Van Hollen Introduces Legislation to Create a Federal “Green Bank”

Maryland Congressman Chris Van Hollen last month introduced “The Green Bank Act of 2014,” legislation that if adopted would create an independent federally-chartered not-for-profit entity to serve as a catalyst for leveraging private capital in order to scale advanced energy technologies. The legislation, which is patterned on the Clean Energy Deployment Administration that received strong bi-partisan support in 2009, also reflects the growing movement by states to develop their own energy financing authorities, including the Connecticut Clean Energy Finance and Investment Authority (CEFIA), the Hawaii Green Energy Market Securitization (GEMS) program, the Vermont Sustainable Energy Loan Fund, and the New York Green Bank.

According to a fact sheet accompanying the legislation, the Federal Green Bank would be provided an initial capitalization of $10 billion to provide financing support for qualifying advanced energy projects across the United States. The Bank would be authorized to engage in a comprehensive range of financing support activities, including loans, loan guarantees, debt securitization, insurance, and other forms of risk management, and would be encouraged to partner with the growing number of state energy financing entities being established across the United States.

U.S. Senate Poised for Vote to Extend PTC, Other Federal Energy Credits

The U.S. Senate looks ready to take up legislation this month to extend a range of federal tax credits that are critical to the continued growth of the advanced energy industry. The “tax extenders” bill, which was approved by the Senate Finance Committee in early April, would extend through the end of 2015 for tax credits for advanced generation systems, smart grid technologies, energy efficiency improvements, advanced transportation infrastructure, and advanced fuels. The tax credits being considered by the full Senate include the following:

In addition to the credits listed above, AEE continues to push for an amendment that replaces the investment tax credit (ITC) placed-in-service deadline with a commence construction standard would allow industries to make full and effective use of the ITC through its current expiration in 2016.

New Brookings Report Recommends Bond Funding to Accelerate Advanced Energy

A new report from the Brookings Institution outlines new approaches for states and local governments to tap bond markets to increase the availability of capital for advanced energy projects. The paper notes that most energy projects are financed differently than those in all other sectors of the U.S. economy, relying on a small group of tax equity investors, federal tax incentives, and other non-capital market sources. More aggressively seeking out financing from the bond or stock markets can help grow the pool of capital available while reducing both the cost of capital and the financial risk. The paper also outlines a number of challenges that must be overcome to take full advantage of the opportunity the bond markets represent, including the limited experience of advanced energy companies with bond finance tools and the relative absence of performance data and standardized documentation that can enable ratings agencies to better evaluate the risks involved in the projects being financed.

As an example of the advanced energy markets working to overcome these barriers, Mercatus, Inc., which through its Solar Investment Analysis platform is a leading solutions provider for the energy project finance industry, formally adopted the Solar Access to Public Capital (SAPC) Work Group standard contract documents for both residential and commercial solar projects. By standardizing power purchase agreements, leases, and other documents relevant to residential and commercial deployment, and the development of robust datasets to assess performance and credit-default risk, SAPC is working to securitize individual projects, a development that is expected to attract additional investors to the solar asset class, enabling the industry to tap a larger and more liquid pool of capital than currently available.

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