Can Your Cleantech Business Get Stimulus Funds?
05.20.2009
Cleantech products and services improve efficiency and productivity by
reducing costs, energy consumption, waste or pollution. Consumer,
regulatory and industry interests in clean energy, global warming and advanced science and
technology have created a growing cleantech market
that attracted more than $1 billion of venture capital funding in the first quarter
of 2009.
The
2009 American Recovery and Reinvestment Act ("ARRA") provides
significant funding opportunities for cleantech
businesses, developers and scientists through tax cuts, grants, loans and loan
guarantees. Altogether, ARRA provides more than $60 billion[1]
in financial assistance for clean energy programs and energy-related technology
development.
Perkins
Coie lawyers have been following ARRA since its
introduction. In February, we published an update on ARRA, generally discussing its
provisions and summarizing its effects on major industry sectors including
energy, transportation, water, rail and infrastructure. This new update
focuses on ARRA's opportunities and benefits for cleantech companies. It is not a complete list
of ARRA's cleantech
opportunities. Rather, it is a general explanation of the various forms
of government aid available under ARRA and a partial list of ARRA support
programs and the agencies responsible for distributing those funds.
Available
Funds
ARRA's
cleantech programs include substantial tax credits,
loans, loan guarantees and grants. These programs are administered by a
number of federal agencies including the Department
of Energy ("DOE"), the Department
of Defense, the Environmental Protection Agency and the Department
of Agriculture. State and local governments also administer
certain ARRA funding programs.
Tax
Credits
ARRA's
tax credits apply to many alternative energy products or processes that are in
research and development stages and are not yet commercially proven.
These tax credits provide important support to the development, manufacture and
deployment of such cleantech products.
Some
tax credits (such as for equipment to manufacture advanced energy devices)
require advance certification, while others are available based on the use of
prequalified equipment (such as wind turbines) or designs (such as combined
heat and power systems).
For
example, ARRA provides a 30% tax credit for investments in property used to
manufacture "advanced energy" products or components such as solar
generation devices, fuel cells, energy storage devices, new wind turbine blades
and carbon capture systems. To receive the credit, projects must be
certified by the U.S. Treasury in consultation with DOE and be selected through
an application process. The U.S. Treasury will define the application
process for such credits by August 2009.
In
addition, ARRA has temporarily increased the Alternative Fuel Vehicle Refueling
credit from 30% to 50% of the cost of the qualifying property, removed previous
limits on the 30% tax credit for residential solar electric, solar water
heating, wind energy and geothermal heat pump projects and expanded the $10 per
ton tax credit for carbon sequestration investments to include Enhanced Oil
Recovery.
Tax
lawyers can advise you on the availability, certification requirements and
organizational structures necessary to fully utilize particular ARRA tax
benefits.
Loan
Guarantees and Loan Programs
ARRA
provides $6 billion in loan guarantees for projects and facilities that make
renewable energy, including precommercial
demonstration projects. These include solar, biomass, hydroelectric and
hydrokinetic generation, biomass and fuel cells. Under the Advanced
Technology Vehicles Manufacturing ("ATVM") loan program,
which was established before ARRA, $25 billion in loans are available to manufacturers
of advanced technology vehicles and their components. These include
hybrid and electric vehicles and battery systems. The DOE published
interim final regulations implementing the ATVM loan program in November 2008
and set a deadline of December 31, 2008 for the initial round of
applications. The DOE is now reviewing applications submitted in that
initial round but has announced that it will also consider additional ATVM loan
applications on a rolling basis as they are submitted. Therefore, the
ATVM loan program remains open to additional applicants.
Grants
Most
of the ARRA grant recipients will be chosen and awarded by the DOE, which has
allocated funds for a variety of programs, including the following:
$2.5
billion through the DOE's Office of Energy Efficiency
and Renewable Energy ("EERE") for applied research and development
projects.
$4.5
billion to promote smart grid, energy storage, transmission and distribution
systems, and related research development and deployment.
$400
million to support "innovative energy" research to improve efficiency, reduce imported energy costs and reduce
greenhouse gas emissions. This could include, among other types of
projects, geothermal, wind, solar, biofuels, biomass
and hydro projects.
$4.5
billion for "green building grants" to upgrade the green building
status of existing federal buildings and an additional $1.3 billion for
specific federal agencies (primarily the Department of Interior and Department
of Defense) to support construction using green building techniques and
standards.
$3.4
billion for fossil energy research and development of "clean coal"
power and carbon sequestration and capture by utility generators and industrial
sources.
$5
billion for weatherization assistance programs to promote energy efficiency in
residential housing, primarily for low-income households. A portion of
these funds is specifically designated for national training and technical
assistance that will benefit all grantees.
Other
grant programs are dedicated to advanced vehicle technology, renewable energy
technology research and development, and smart grid technology.
Advanced
Vehicle Technologies/Transportation
EERE
has issued two major Funding Opportunity Announcements for demonstrating and
manufacturing advanced technology vehicles. First, EERE is implementing a
$2-billion program for Electric Vehicle Battery and Component Manufacturing
in which EERE encourages the collaboration of manufacturers and potential
customers/end users. Second, EERE has developed a $378 million Transportation Electrification program to
demonstrate and evaluate plug-in hybrid vehicles. EERE seeks applicants
for this program that are
Research
and Development
EERE
has allocated $800 million for biomass programs including integrated pilot and
demonstration scale biorefinery projects, commercial
scale biorefinery projects, fundamental research in
key areas, such as infrastructure-compatible biofuels
and algal biofuels, and ethanol research. An
additional $93 million is designated for wind energy projects, including wind
power drive train research, development and testing, technology development in
the private sector, and consortia between universities and industry to focus on
critical wind energy research and development challenges. In addition,
$400 million is allocated for the Geothermal Technologies Program.
Smart
Grid
In
April, the DOE released a draft $615-million Funding
The
BPA intends to fund a major regional smart grid demonstration with three to
five partner utilities in its territory. In April, the BPA released a Request for Interest to identify partnering utilities or
utility coalitions to help design and implement the demonstration
project. Partnering utilities will contribute funding and help the BPA
design the smart grid. Once the BPA selects its utility partners, the
BPA/utility team will recruit companies offering smart grid-related products
and technologies, such as meters, real-time indicators, telemetry devices and
software, to participate in the project build-out.
On
May 13, 2009, the BPA released a Request for Interest to potential vendors who will work
directly with the BPA to design the BPA/utilities portion of the smart grid
system, including data acquisition and management for the smart grid
project. BPA's choices for utility partners and consultants may presage
the choice of system and system equipment that is ultimately installed for the
project. Equipment vendors may be eligible to respond to this Request for
Interest.
Cautions
ARRA
is supposed to supply "fast-track" funds to provide immediate
stimulus to the economy. Nevertheless, government funding procedures are
often arduous and time consuming, and companies that enter into federally
funded agreements (whether grants, contracts or other cooperative agreements)
must exercise care and consult with counsel to understand their rights and
obligations under these agreements. These hurdles should not dissuade a
company from seeking federal funds or entering into federally funded
agreements. However, companies need to be aware of the extensive rules
applicable to such agreements and devote the necessary resources to
understanding and clarifying their rights and obligations.
Intellectual
Property Protection
Companies
taking government funds must protect their intellectual property
("IP") rights. Federal statutes provide the
Similarly,
private contractors must comply with other rigorous federal rules to retain
their rights for technical data or software developed in performance of a
federally funded agreement and must properly identify and mark any background
IP to ensure that they do not inadvertently lose their rights to any background
IP developed exclusively at private expense.
Applying
for Funds
Applications
for ARRA funds, including grant proposals and loan applications, are technical
documents governed by complicated federal procurement rules and
regulations. Submissions must satisfy these requirements of
"substantial completion" before a reviewing federal agency can
consider their merits. If a submission does not conform to the
requirements, including the demonstrations of eligibility, and relevance and
the inclusion of all required supporting information, the award and funding
process may be significantly delayed or even closed off. Under ARRA in
particular, as multiple applications likely will be submitted for each
opportunity, it is important for an applicant to ensure that its documents pass
review for completeness and eligibility from the start. Experienced counsel are familiar with the details of the various
government procurement and award rules and regulations and can give an
applicant invaluable help through the often-confusing application process and
thereby improve the chances of success.
NEPA
Compliance
The
award of any discretionary grant, loan, loan guarantee or other funding
requires the federal agency granting the assistance to comply with the National
Environmental Policy Act ("NEPA") and other federal environmental
laws. Compliance with NEPA is the federal agency’s responsibility, but
the burden of preparing the environmental documentation falls largely on the
applicant. Typically, the agency will require the applicant to submit
detailed environmental reports as part of the application. The agency
then uses those reports to determine the appropriate level of NEPA review and
to begin preparing the required NEPA documents.
For
projects that take place within existing facilities and do not alter those
facilities or increase emissions, it may be possible to satisfy NEPA
requirements with the lowest level of documentation, known as a categorical
exclusion ("CatEx"). A CatEx can often be completed in a few weeks. If a project
does not meet the requirements for a CatEx, the
agency must prepare an Environmental Assessment ("EA") or an
Environmental Impact Statement ("EIS"). An EA typically takes
several months and an EIS typically takes a year or longer – in some cases, much
longer. These time frames are approximate but underscore the potentially
substantial delays associated with NEPA compliance. Project sponsors can
help minimize those delays in several ways. For projects that involve any
new, expanded or modified facilities, it is prudent to have NEPA counsel
involved early to assist in developing a strategy for minimizing NEPA-related
delays.
Restrictions
on Lobbyists
The
Obama Administration, through the Office of Management and Budget
("OMB"), has barred registered lobbyists from participation in
discussions of specific ARRA stimulus proposals. White House Memorandum for the Heads of
Executive Departments and Agencies.
Lobbyists may make written presentations, and they may communicate orally on
policy and logistics but not on specific projects. For more information,
Perkins Coie has published a brief summary of the
most recent OMB circular at our lobbying law Web site www.lawandethicsonline.com (registration
required).
Conclusion
We are following the various agency rulemakings, funding opportunity
announcements, and requests for interest and proposals
related to ARRA. Counsel can assist in quickly and efficiently
identifying ARRA funding opportunities and in navigating the application
process.
[1] $26 billion to support energy
efficiency, $17 billion for smart grid support and $16 billion for energy‑related
tax incentives.
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