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Clean Renewable Energy Bonding Program – Briefing Summary

| Written by John Farrell | No Comments | Updated on Nov 7, 2005 The content that follows was originally published on the Institute for Local Self-Reliance website at https://ilsr.org/clean-renewable-energy-bonding-program-briefing-summary/

Held on November 2nd, a national call-in briefing provided information on the new Clean Renewable Energy Bond (CREB) program that was included in the recently enacted Federal energy bill. The program allows eligible nonprofit entities to issue bonds to finance renewable energy projects.

The call-in was hosted by the Environmental Law and Policy Center of the Midwest (Chicago). The briefing drew more than 200 attendees, indicating the enormous interest in the program. The CREB program allows municipally and cooperatively-owned utilities and other nonprofit entities to issue “no interest” bonds to finance renewable energy projects. Purchasers of the bonds are then eligible for federal tax credits rather than interest payments.

The program was deemed necessary because traditional renewable energy production tax incentives do not work for not-for-profit entities, as they have no federally taxable income to offset. Nonprofit revenues above cost of service are returned to customers, used to reduce rates or are reinvested in infrastructure improvements rather than paid to shareholders.

The CREB program authorizes up to $800 million in bonds to be issued over the next couple of years once the regulations are finalized. During the call, the speakers shed light on the purpose of the bonds, how the bonds are to be issued, who will purchase them and other topics. Some key points made by the various speakers on the call:

  • The program is patterned after the Qualified Zone Academy Bonds (QZABs) used to finance school improvements.
  • $800 million in bonds are authorized over two years. Bonds can be issued by any public entity or rural electric co-op.
  • Congress had in mind an incentive for investment in clean, renewable energy. These tax credit bonds will benefit public power agencies and electric coops.
  • Proceeds of the bonds can be used to fund a wide variety of clean energy projects, not just wind.
  • CREBs are like having an interest-free loan to finance projects. However, there are issuance costs of 1-2% associated with the bonds.
  • Tax credits will be received by purchasers. These credits are taxable to the purchasers.
  • The bonds will have a twelve to fifteen year repayment term.
  • Whereas QZABs could only be bought by institutional investors, almost anyone can buy CREBs.
  • The legislative intent of these bonds is to provide an incentive for publicly-owned projects that do not qualify for federal Production Tax Credits (PTCs). You cannot use dollars raised by CREBs to support privately-owned projects. These bonds are available to any governmental or public entity, not just utilities.
  • Smaller projects can be pooled to lower bond issuance costs.

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    About John Farrell

    John Farrell directs the Energy Democracy initiative at the Institute for Local Self-Reliance and he develops tools that allow communities to take charge of their energy future, and pursue the maximum economic benefits of the transition to 100% renewable power. More

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