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Amended rules on grant eligibility cause confusion

US: An expert in renewables law believes the US Treasury needs to revisit the rules for developers seeking to qualify for grants under the economic stimulus package after its first attempt failed to remove confusion.

To be eligible for the federal government's popular renewable energy grant programme, wind projects must begin construction and spend at least 5% of their total capital costs by the end of this year.

But according to Greg Jenner, partner at law firm Stoel Rives and an expert in renewables law, some rules for qualifying are still unclear, despite recent guidance issued by the US Treasury Department aimed at clarifying the issue. "The Treasury is trying to help and they've done exactly the opposite," says Jenner. "They've just muddied the water."

The cash grants, which were introduced last summer as part of the American Recovery and Reinvestment Act, cover 30% of a wind plant's installed capital costs for projects brought online by the end of 2012.

The government set the money to boost the economy. But the 5% target means a developer must take delivery of equipment in 2010 or get a manufacturer to specify which turbines the developer's money was used to build.

Unnecessary deadline

The hurdle is especially vexing for developers that buy turbines in bulk, says Jenner. "It's only as they get close to the deal that (for example) they'll identify that, out of the 300 turbines they've ordered, 100 are going here, 100 are going here and 100 are going here - and these are the specific ones," he says. "The notion that they can somehow trace this money that's being spent - that's laughable."

Jenner believes the deadline is unnecessary as the grants are a subset of the government's investment tax credit programme, which does not stipulate when construction should begin, although maintains the same end-of-2012 completion deadline. "The begin-construction requirement doesn't do anything other than take the cash grant away," says Jenner.

Jenner expects developers to sprint to make December's construction deadline, which could lead to poor decisions. A developer might build a facility, he says, even if it is not the most economically efficient time to do it, because it wants to get the cash rather than the tax credit.

The ideal solution, Jenner says, is for Congress to change the law as soon as possible. "The ball really is in Congress's court," he says. "Get rid of the deadline completely, extend it, do something with it - and do it fast.

"The grant has been a game-changer. And given that we're not economically out of the woods yet by any means, there's no reason that they couldn't change this and keep it working."

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