On July 29, 2009, the United States Department of Energy (DOE) made the United States government’s second eagerly awaited announcement of the month of July (after the July 9 release of the Section 1603 grant in lieu of tax credit program guidance by the U.S Treasury) announcing the availability of federal loan guarantees for projects that employ innovative energy efficiency, renewable energy, and advanced transmission and distribution technologies (Solicitation). The Solicitation invites interested parties to apply for loan guarantees under Title XVII of the Energy Policy Act of 2005 (Innovative Technology Loan Guarantee Program” or “Section 1703 Program), as amended by the American Recovery and Reinvestment Act of 2009 (ARRA).
In February, the ARRA added Section 1705, which provides for the rapid deployment of loan guarantees for eligible renewable energy, renewable energy manufacturing, transmission, and biofuels projects (Rapid Deployment Program). The ARRA also appropriated funding to pay credit subsidy costs associated with Section 1705 loan guarantees. Funding to pay credit subsidy costs is a major difference between the Section 1705 Rapid Deployment Program from the prior enacted Section 1703 Innovative Technology Loan Guarantee Program, where the applicant was (and continues to be) responsible for all credit subsidy costs. Importantly, the Rapid Deployment Program requires that projects must commence construction by September 30, 2011 which is the date when the DOE’s authority to enter into a 1705 loan guarantee expires.
Key Details of the Solicitation
The July 29, 2009 Solicitation allows applicants to apply under either the Section 1703 Program or, if eligible, under the 1705 Rapid Deployment Program. Essentially, the Solicitation creates two eligibility tracks for applicants depending on whether their projects qualify under certain enumerated technologies available for Section 1705 loan guarantees or Section 1703 loan guarantees. For projects that qualify under Section 1705, DOE will make available under the Solicitation up to $2,500,000,000 of the approximately six billion dollars allocated by the ARRA to pay credit subsidy costs of loan guarantees for these Section 1705 eligible projects. This subsidy amount is expected to support up to $30,000,000,000 of loan guarantees awarded by the program through this Solicitation.
The Solicitation also clarifies that a Section 1705 eligible project must satisfy all requirements of the Section 1703 program, including the controlling Final Regulations, which were released in October 2007. Specifically, in order to qualify for a loan guarantee under Section 1705, a project must constitute a renewable energy system or manufacturing facility project, an electric power transmission project or leading edge biofuels project that (i) employs a new or significantly improved technology; (ii) is reasonably likely at the time of the submission of the application to commence construction prior to September 30, 2011, and (iii) meets all requirements of Title XVII , including Sections 1703 and 1705, and of the Solicitation and of the Final Regulations, as well as meets all applicable requirements of the ARRA. Key additional requirements of the ARRA include adhering to Davis-Bacon prevailing wage requirements, ARRA job-creation reporting requirements, and applicable “Buy American” requirements.
The Solicitation sets forth nine eligible technology categorie1, and explains that DOE is accepting applications that are either stand alone projects or manufacturing facilities for technologies that otherwise fall within these categories. Importantly, the Solicitation also notes the subset of these technologies eligible for the 1705 Rapid Deployment Program and funding.
For both Section 1703 and Section 1705 applications, the Solicitation is only focused on innovative projects that clearly demonstrate that the project is ready to proceed to commercialization. Projects still at the pilot stage or that have not completed full-scale demonstration are not considered eligible under the Solicitation.
Timing and Application Process; Fees
There is a two step application process for both the Section 1703 Program and the Section 1705 Rapid Deployment Program broken down into a Part I initial application submission followed by a more detailed Part II application submission. Instructions for completing Part I and Part II are set forth in Attachments A1 and A2 of the Solicitation. The DOE will be accepting application submissions in seven separate rounds pursuant to the following schedule:
To view table click here.
Applicants are required to pay the first 25 percent of a non-refundable application fee when submitting the Part I application followed by payment of the remaining 75 percent non-refundable application fee when submitting the Part II application. Specific to 1705 Rapid Deployment Program applications, an applicant must demonstrate that all necessary permits, licenses, and approvals necessary to enable the project to commence construction by September 30, 2011 either have or will be obtained. DOE must approve the Part I submission as a new or significantly improved technology, and will provide an applicant with “self-selection” information that allows the applicant to consider whether or not to proceed with Part II of the Application.
Application fees range from $75,000 to $125,000 depending on the amount of the loan guarantee. Additionally, an applicant is required to pay a Facility fee and a Maintenance fee as set forth on Attachment C of the Application. The Facility fee is equal to a percentage of the guaranteed loan amount (1 percent for loan guarantees below $150,000,000 and higher fees for larger guaranteed amounts. Twenty percent of the Facility fee is due upon the execution of a term sheet, and the remaining 80 percent is due upon the closing of the Loan Guarantee Agreement. Finally, the Maintenance fee is expected to be in the range of $50,000 to $100,000 and covers DOE’s ongoing administrative expenses associated with servicing and monitoring the loan guarantee agreement. For projects that do not qualify under the Section 1705 Rapid Deployment Program, approved applicants must also pay the credit subsidy costs associated with the loan guarantee, which is equal to the net present value of the loan guarantee to the U.S. Government.
The Solicitation also provides that a “Project Sponsor” may only submit one application for one project employing a particular technology. This means that a project sponsor cannot submit multiple applications to develop multiple projects utilizing the same technology.
While this summary provides some of the key details about the Solicitation, it is critical to review all details associated with the Solicitation and the Final Regulations prior to applying.