Treasury Secretary Tim Geithner and Energy Secretary Steven Chu recently hosted a group of clean energy developers and manufacturers at the White House to discuss how the American Recovery and Reinvestment Act (ARRA) is creating jobs and helping expand the development of clean, renewable domestic energy. At the meeting, Geithner and Chu announced $550 million in new awards through the Recovery Act’s 1603 program, bringing the total to more than $1 billion awarded to date to companies committed to investing in domestic renewable energy production.
“This Recovery Act program is an example of a true federal partnership with the private sector,” said Geithner. “Not only are our Recovery dollars meeting an immediate funding need among innovative companies, they are also jumpstarting private sector investment in communities across the country-with benefits for the renewable energy industry and our economy alike.”
According to Chu, “These investments are crucial to ensuring America can compete and win in the race for the clean energy jobs of the future. With American workers and American innovation, we can and must lead the world when it comes to the new Industrial Revolution in clean energy.”
Created under Section 1603 of the Recovery Act, the program provides cash assistance to energy producers in place of tax credits. The payments improve project viability, enabling companies to create and retain jobs, and establish sufficient financing bases for projects that may otherwise not be possible, thus expanding and accelerating the development of renewable energy projects throughout the country. Under this program, the federal government provides a cash payment (in lieu of a tax credit) totaling 30% of the qualifying cost of the project; for each federal dollar spent in payments, more than two dollars are spent in private sector investments.
The Treasury Department recently made the second round of awards, all of which will be made in half the statutorily mandated turnaround time of 60 days. The first round of awards totaling $502 million was announced on September 1, 2009; the most recent announcement provides an additional $550 million. The 1603 program is having an immediate effect on the renewable energy industry by significantly increasing the availability and liquidity of project capital in three ways:
- Recycling grants into new projects. Project developers are able to begin construction of additional projects thanks to the extra capital from the grants they are receiving.
- Increasing the flow of capital. By reversing the drop in availability of equity investment available, the 1603 program brings significant private capital off the sidelines to finance more renewables projects.
- Attracting investment for domestic projects. Large project developers allocate capital across many countries, and the 1603 program is attracting billions of dollars of additional capital toward projects in the U.S.
for additional information.