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United States

Just build wind farms, say US grant makers

US: As the December deadline approaches for the federal government's lucrative renewable energy grant programme, the US Treasury Department has made an extra effort to clear up the confusion that has mired its flagship incentives scheme.

Under the clarification, developers need worry less about proving specific construction benchmarks in 2010, but simply start construction this year and finish by 2012.

Federal cash grants - the industry lifeblood since their introduction under the American Recovery and Investment Act - offer developers 30% of a wind project's installed capital costs for projects brought online by the end of 2012. To qualify for the cash, developers must begin construction and spend 5% of those total capital costs by the end of this year.

The major problem, according to Greg Jenner, partner at law firm Stoel Rives and an expert in renewables law, is that the rules for reaching 5% have been ambiguous and hard for developers to prove (Windpower Monthly, May 2010). The Treasury apparently agreed and posted answers to 35 frequently-asked questions on its website this summer.

"They go a long way in clarifying what were a number of uncertainties about how the rules worked," says Jenner.

One main question had been how to assess the start of construction as a percentage. "Now Treasury says you can really just start construction," Jenner says. "However, once you start, you pretty much have to keep going. As long as you keep going, then you've begun construction. And that's a really good, common sense answer."

On the other hand, he says, a project that begins construction by the end of the year and then stops is likely to face close scrutiny. "In that situation, it looks like somebody's just out there with a few shovels in order to get in under the rule," Jenner says.

Treasury also clarifies its alternative to the begin-construction stipulation, which involves taking delivery of turbines by April 15, 2011. "They set out exactly how you can attribute the amounts spent by the contractor," Jenner says. "But, in our view, the easiest way to qualify for beginning construction is to begin construction. Forget about this 5% garbage, especially now that Treasury has said, 'If you start and you keep going, you'll be fine.'"

Jenner and others ultimately believe the best course for the programme would be to put an end to any qualifying stipulations by simply requiring that wind projects be put in service by the end of 2012. "If Congress were to do that, and if they were to do it now rather than wait until December, that would be a really good thing," Jenner says.

Treasury's recently published list shows more than $4.6 billion going to 835 awardees, most of which are solar developers. But the biggest amounts went to wind developers, including several projects awarded grants worth upwards of $100 million each. The biggest grant, for $218.5 million, went to California-based Cannon Power Group for two phases of its 500MW Windy Point/Windy Flats development in Washington state.

Tom Trimble, an attorney for Cannon through law firm Hunton and Williams, says the grants have been a great success. "The programme is enabling projects that otherwise might not get off the ground," he says. "This has been just lightning quick in translating to jobs and dollars."

The programme involves a streamlined online application process that promises cash for developers 60 days after the government is satisfied that a submission contains comprehensive information. "There are ways to ... help an application ... by anticipating reviewers' questions," Trimble says. "You want to minimise the number of times they're going to come back at you because you don't want to start resetting that 60-day clock."

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