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greenpaper
Renewable Energy Project Finance in the U.S.:
2010-2013 Overview and Future Outlook
Produced in Collaboration with
January 2012
 
greenpaper
Renewable Energy Project Finance in the U.S.:
2010-2013 Overview and Future Outlook
2
Copyright © 2012 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
1 EXECUTIVE SUMMARY 3
1.1 Hindsight: 2010 & 2011 31.2 Foresight: 2012-2013 3
2 KEY FINDINGS 5
2.1 Hindsight 52.2 Foresight: 2012-2013 62.2.1 Macro Trends 62.2.2 Tax Equity Market 72.2.3 Impact o 1603 Cash Grant’s Expiration 8
3 OVERVIEW: RENEWABLE PROJECT FINANCE 9
3.1 Corporate Structure 93.2 Capital Formation 103.2.1 Direct Equity 123.2.1.1 Terms & Availability 123.2.1.2 Market Trends 123.2.2 Tax Equity 133.2.2.1 Tax Equity Financing Structures 153.2.2.2 Terms & Availability 163.2.2.3 Market Trends 183.2.3 Project Debt 193.2.3.1 Loan Characterization 203.2.3.2 Terms & Availability 213.2.3.3 Market Trends 213.2.4 Non-Traditional Financing Structures &Instruments 22
4 FEDERAL TAX INCENTIVES & PROGRAMS 24
4.1 Investment Tax Credit (“ITC”) 244.2 Production Tax Credit (PTC) 244.3 Accelerated Depreciation (MACRS) & BonusDepreciation 254.3.1 Accelerated Depreciation 254.3.2 Bonus Depreciation 254.4 Department O Energy Title XVII LoanGuarantee Program (Section 1703) Program 254.5 Department o Agriculture’s BioreneryAssistance (9003) Program 264.5.1 Overview 264.5.2 Program Rules & Bond Financing Structures 274.5.3 Impact 28
5 THE AMERICAN RECOVERY & REINVESTMENT ACTOF 2009
295.1 Title XVII Section 1705 Loan Guarantee Program 295.1.1 Overview 295.1.1.1 Credit Subsidy 295.1.1.2 Financial Institution Partnership Program 295.1.2 Impact 305.2 ITC Election or PTC Property 335.3 1603 Cash Grant Program 335.3.1 Overview 335.3.2 Impact 345.3.2.1 Onshore Wind 355.3.2.2 Solar 365.3.2.3 Geothermal 365.3.2.4 Biopower 375.3.2.5 Other Renewable Cash Grants 38
6 DEMAND SCENARIOS: PROJECT FINANCINGFORECAST THROUGH 2013 39
6.1 Methodology 406.2 Forecasts by Technology: 2011-2013 416.2.1 Onshore Wind 416.2.1.1 Assumptions 416.2.1.2 Condence Factors 426.2.2 Solar 426.2.2.1 Assumptions 426.2.3 Forecast or Other Renewable EnergyTechnologies 436.2.3.1 Assumptions 436.2.4 Biouels (Ethanol & Biodiesel) 44
7 SUPPLY SCENARIOS: FINANCING AVAILABILITYFORECASTS THROUGH 2013 45
7.1 Section 1603 Cash Grant Program 457.1.1 Impact 467.1.2 Assumptions 467.2 Extension or Expiration o PTC orUtility-Scale Wind 487.3 Other Novel Policy Concepts 487.3.1 Master Limited Partnerships 487.3.2 Technology Neutral Production Cash Grant 49
8 CONCLUSION 509 APPENDIX: 2010 Project Data 51
TABLE OF CONTENTS
 
greenpaper
Renewable Energy Project Finance in the U.S.:
2010-2013 Overview and Future Outlook
3
Copyright © 2012 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
1 EXECUTIVE SUMMARY
The Mintz Levin law rm and GTM Research are pleased to provide an analysis o projectnancing trends or utility-scale renewable power projects and advanced project nancingbiouel reneries constructed in the United States, as well as orecasting the anticipatedsupply and demand levels sought through 2013.
1.1 Hindsight: 2010 & 2011
Since the ourth quarter o 2008, U.S. renewable power project’s ability to secure bothequity and debt project nancing dropped precipitously due to the systemic turmoilexperienced in the global nancial markets. As we approach the third anniversary o thateconomic crisis, the prospects or project nancing have improved considerably due toseveral market trends and signicant legislative policy support mechanisms:
•
Increased liquidity in the debt markets,
•
Lower costs o capital attributable toreduced debt spreads,
•
The availability o longer tenorsor term-debt,
•
The Payments or Specied EnergyProperty in Lieu o Tax Credits (2009Recovery Act, Section 1603 Cash GrantProgram “1603 Cash Grants”) originallyauthorized the American Recovery &Reinvestment Act,
•
The U.S. Departments o Energy &Agriculture’s Loan GuaranteePrograms, and
•
Emergence o Strategic Equity toSupplement Venture Capital and PrivateEquity Investments.
1.2 Foresight: 2012-2013
In orecasting capital markets and availability or renewable project developers seekingto secure non-recourse project nancing, the three (3) most dispositive actors impactinguture capital ormation trends will be:
•
The December 2011 expiration o the 1603 Cash Grants,
•
The December 2012 expiration o the Production Tax Credit (“PTC”) or wind, and
•
Macro-trends in tax equity nancing, which are highly correlated to the nancial health o alimited number o large nancial institutions.
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