Shepherd Advisors Clean Tech Articles
On January 8 President Obama announced the award of $2.3 billion in Recovery Act Advanced Energy Manufacturing Tax Credits for clean energy manufacturing projects across the country. Overall, 183 manufacturing projects in 43 states received awards.
The tax credits, worth up to 30% of each planned project, correspond to total company investments of nearly $7.7 billion in high tech, clean energy manufacturing. In total, the projects are expected to create more than 17,000 jobs.
Based on the program's success, The White House has proposed expanding the tax credit program by $5 billion. Senior administration officials expect to move the proposal through Congress quickly.
Thirteen Michigan manufacturers received tax credits totaling more than $240 million, representing over 10% of the national total, with individual awards ranging from $300,000 to $142 million. Among these projects, tax credits for solar and wind accounted for 88% and 12%, respectively. Awardees included:
Company, Tax Credit ($ mil), Clean Energy Manufacturing Area
Dow Chemical (two projects), $20.0, Solar-PV
Dow Corning -- Solar Silane, $27.3, Solar-PV
Energetx Composites, $2.0, Wind Turbines
Flame Metals Processing, $1.4, Wind Turbines
Great Lakes Industry, $1.3, Wind Turbines
Guardian Industries (two projects), $3.6, Solar-Concentrated
Hemlock Semiconductor, $141.9, Solar Components/Materials
ilumisys, $1.3, Buildings
Kaydon, $1.8, Wind Turbines
Merrill Technologies Group, $22.0, Wind Turbines
Rogers Foam Automotive, $0.3, Battery
Stirling Energy Systems, $9.8, Solar-Concentrating
United Solar Ovonic, $13.3, Solar-PV
Shepherd Advisors provided assistance to Merrill Technologies Group, based in Saginaw, MI, in securing the tax credit. In addition, Shepherd worked with several other manufacturers to assess feasibility of applying for the credit.
Selection Process
The winning projects were selected through a rigorous merit review process. The program was oversubscribed by a ratio of more than 3 to 1; over 500 applications were received with tax credit requests totaling over $8 billion.
Qualifying manufacturing facilities will produce:
- Solar, wind, geothermal or other renewable energy equipment
- Electric grids and storage for renewables
- Fuel cells and microturbines
- Energy storage systems for electric or hybrid vehicles
- Carbon dioxide capture and sequestration equipment
- Equipment for refining or blending renewable fuels
- Equipment for energy conservation, including lighting and smart grid technologies
- Plug-in electric vehicles or their components
- Advanced energy property designed to reduce greenhouse gas emissions
The statutorily specified review criteria included:
- Greatest domestic job creation (direct and indirect)
- Greatest net impact in avoiding or reducing air pollutants or emissions of greenhouse gases; lowest levelized cost of energy
- Greatest potential for technological innovation and commercial deployment
- Shortest project time from certification to completion
Projects selected for the tax credit generally must be placed in service by 2014.
For the award announcement, including access to the full list of selections, please visit:
http://www.whitehouse.gov/the-press-office/president-obama-awards-23-billion-new-clean-tech-manufacturing-jobs
A fact sheet related to the announcement can be found at:
http://www.whitehouse.gov/the-press-office/fact-sheet-23-billion-new-clean-energy-manufacturing-tax-credits
For additional information regarding the clean energy manufacturing tax credits, please contact Tim Kumbier at 734-975-0333 or tim@shepherdadvisors.com.
At the Supply Chain Workshop of the AWEA Small and Community Wind Conference in Detroit last month, there was quite a bit of discussion about the current pace -- or lack thereof -- of growth in the US large wind turbine manufacturing sector. Supply chain managers from several established European OEMs (Vestas, Nordex, and Nordic Windpower) said that building their US supply chains are a priority. Yet, it's clear that the current pace of domestic supply chain expansion in the US is very slow.
Contributing factors include:
- The decline of new orders for turbines in the US has been pronounced, from nearly 8500 MW of new capacity in 2008 to an estimated 5800 MW through 3Q09. The slower US market has lowered OEM production forecasts compared to a year ago.
- The wind market has declined globally, creating excess production capacity in Europe.
- European OEMs are in a very conservative stance right now, driving to get better pricing and more fully utilizing current (mostly European) supplier capacity. OEM attention is now focused more on improving current production systems, and less on future expansion.
- In addition, some OEMs are digging through a financial squeeze caused by customer pressure for lower prices and high costs for steel that OEMs locked-in a year or two ago.
All of the OEMs presenting at the conference asked suppliers to nonetheless contact them, to be persistent, and not to be discouraged if OEMs do not call back in a timely manner. They just don't have much offer right now.
While it was not stated as such, it looks like most established utility wind OEMs will not be adding too many new US suppliers until financing becomes easier and there is clear evidence of a solid rebound in the US wind turbine market.
There are encouraging signs to be sure. For instance, Nordex broke ground on its Jonesboro, Arkansas assembly facility in September, with production scheduled to begin in mid-2010. In October, Mitsubishi announced its intention to build a wind turbine manufacturing facility near Ft. Smith, Arkansas, with construction scheduled to begin in early 2011.
This speaks well for the long term. Yet, it's probably safe to assume that it may be not be till 2Q10 or later before most OEMs start to return the phone calls.
Community Wind is still nascent compared to large wind. As of early 2009, approximately 1 GW of community wind had been installed in the U.S., compared to more than 25 GW of large wind. However, with the increase in favorable State and Federal policies and incentives, this market is poised for dramatic growth. In 2008, DOE's National Renewable Energy Lab (NREL) conducted a study that indicated substantial market potential exists for mid-sized (100 kW to 1 MW) wind turbines. Barriers to achieving that potential have included diseconomies of scale for smaller projects, comparatively high fixed costs of construction, and financing challenges unique to community projects. One significant barrier, in particular, has been a lack of commercially available turbines in the mid-size range. In response, NREL launched the Mid-Size Turbine Development Project to facilitate the development and commercialization of mid-size turbines.
If conference attendance is any indication, interest in community wind is coming on strong. In its first "solo appearance," the AWEA Small and Community Wind conference drew nearly 1700 attendees, some 40% more than anticipated. The community wind workshop track was well attended. Following the three day AWEA conference, 175 registrants stayed for NREL's half-day Mid-Size Wind Turbine Development Workshop. The workshop kicked off the NREL development project, bringing together project developers, OEMs, component suppliers, and wind turbine consultants. Highlights of the workshop are captured here.
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Community Wind Background
According to Windustry, a leading community wind advocacy group, the U.S. community wind installed base is small relative to utility-scale wind -- 1089 MW versus 25,317 MW through April 2009. Of that more than 1000 MW was concentrated in five states (MN, WA, CA, NE, IA) and nearly half in MN.
In the right situation, community wind can yield significant benefits:
- Opportunity for local ownership and control
- Keep economic benefits local
- Greater self-sufficiency -- "power to the people"
- Risk mitigation against high energy cost, especially in remote/isolated locations (e.g. high diesel fuel costs for diesel generators)
Active, passionate community involvement is key to driving projects forward and overcoming obstacles that impact community wind, in particular:
- Diseconomies of scale inherent in smaller projects
- Relatively high fixed installation costs (e.g. crane mobilization)
- Insufficient policy and financial incentives targeted to community wind
- Financing challenges beyond those faced by utility-scale projects
- Presence of relatively few OEMs limits turbine availability and competition
Community wind is more about ownership philosophy and application characteristics, than specific turbine and project sizes. That said, typical project sizes range from 100 kW to 20 MW, though some developers promote "utility-scale community wind" with project sizes reaching 80 MW plus. "Mid-size" turbines of 100 kW to 1 MW are often associated with community wind, however, plenty of 1.5 MW (and even some 2 MW+) turbines being used in community wind applications.
One issue hampering community wind has been the relatively few turbine manufacturers in the "mid-size" range of 100 kW to 1 MW; some size ranges have just one or two competitors. To support larger wind farms and achieve scale economies, many OEMs have "migrated up" to larger sizes, leaving a void in the mid-size range.
While development of any wind project is a complex undertaking, community wind projects are especially difficult to execute. Non-profits such as municipalities are unable to directly use Federal tax incentives, leading to projects that incorporate a "patchwork" of financing tools, creative ownership structures, etc. Project feasibility is highly dependent on state-specific policy and incentives. In short, "when you've seen one community wind project, you've seen one community wind project."
If you are interested in pursuing community wind opportunities, call Tim at Shepherd Advisors to learn more, 734-975-0333.
Advanced Energy Manufacturing Tax Credit (48C)
Shepherd Advisors can assist manufacturers in receiving a 30% tax credit for qualifying investments in advanced energy projects, under a program jointly administered by the U.S. Department of Energy (DOE) and the U.S. Department of Treasury.
Background
The American Reinvestment and Recovery Act of 2009 (ARRA) authorizes the Department of Treasury to award $2.3 billion in tax credits for qualified investments in advanced energy projects, to support new, expanded, or re-equipped domestic manufacturing facilities. The Advanced Energy Manufacturing Tax Credit (MTC) provides a 30% credit for qualifying investments.
The application process consists of two submissions -- a Preliminary Application due September 16, and a Final Application due October 16.
The DOE and Internal Revenue Service (IRS) will review and make determinations of the eligibility and merit of MTC applications. Applicants will receive tax credits based on the expected commercial viability of their project and the ranking of their project relative to other projects. Rankings will be based on: expected job creation, reduction of air pollutants and greenhouse gas emissions, technological innovation, and ability to have the project up and running quickly. The four evaluation criteria are equally weighted. Technology, geographic and project size diversity, and regional economic development will also be considered when rating projects. Projects must be completed within 4 years of their tax credit acceptance. Eligible investment credits cover future expenditures and do not award past investment.
Why Work with Shepherd?
The application requirements are comprehensive and complex. They involve extensive data collection (from both internal and external sources), data interpretation and manipulation, quantitative data analysis/modeling, and substantial narrative creation (e.g. business plan).
Shepherd will help manufacturers streamline the application process and submit high quality applications. We will work with you to confirm eligibility, collect and synthesize required data, perform required quantitative analyses, and draft narratives. Shepherd will support your navigation through the process, ensuring that your submissions are delivered on time and according to specification.
Timeline
| 9/16/2009 | Applicant submission of Preliminary Application to USDOE |
| 10/16/2009 | Applicant submission of Final Application to DOE and Application for §48C Certification to IRS |
| 12/16/2009 | DOE completion of merit review of Final Applications; recommendation to IRS |
| 1/15/2010 | By this date IRS accepts or rejects Application for §48C Certification and notifies applicant, by letter, of its decision. If application is accepted, date of this letter will be treated as the "acceptance date." |
| 3/15/2010 | Applicant must execute a project agreement with IRS |
| 4/16/2010 | IRS executes and returns agreement to applicant |
| Within one year of Acceptance Date | Applicant must provide evidence to IRS that certification requirements have been met. IRS will then decide whether or not to certify the project and notify the applicant, by letter, of that decision. If the IRS certifies the project, the date of this letter is the "date of issuance of certification." |
| Within three years of Date of Issuance of Certification | Applicant must place project in service |
Eligibility
A qualified investment for any taxable year is the basis of eligible property that is placed in service by the taxpayer during such taxable year and is part of a qualifying advanced energy project.
A qualifying advanced energy project is one that re-equips, expands, or establishes a manufacturing facility for the production of specified advanced energy property (SAEP), or property that after further manufacture will become SAEP. SAEP includes:
- Property designed for use in the production of energy from the sun, wind, geothermal deposits, or other renewable resources;
- Fuel cells, microturbines, or an energy storage system for use with electric or hybrid-electric motor vehicles;
- Electric grids to support the transmission of intermittent sources of renewable energy, including property for the storage of such energy;
- Property designed to capture and sequester carbon dioxide and sequester carbon dioxide emissions;
- Property designed to refine or blend renewable fuels (but not fossil fuels) or to produce energy conservation technologies (including energy-conserving lighting technologies and smart grid technologies);
- New plug-in electric drive motor vehicles, qualified plug-in electric vehicles, or components that are designed specifically for use with such vehicles, including electric motors, generators,, and power control units or;
- Other property designed to reduce greenhouse gas emissions as may be determined by the IRS.
Eligible property is property necessary for the production of SAEP and is tangible personal property or other tangible property used as an integral part of the qualifying advanced energy project (e.g. manufacturing equipment). NOTE: A building or its structural components are NOT eligible property.
Placed in service means placed in a condition or state of readiness and availability for the intended purpose.
Deliverables
Preliminary Application for DOE Recommendation (9/16/2009). Brief, straightforward document providing basic applicant information and summary level project information.
Final Application for DOE Recommendation (10/16/2009). Comprehensive document including:
- Executive Summary
- Demonstration of Eligibility
- Advanced Energy Project Qualification
- Commercial Viability
- Business Plan
- Financial Plan
- Performance against Evaluation Criteria (including underlying calculations/quantitative analysis)
- Domestic Job Creation
- Impact on Air Pollution and Emissions of Greenhouse Gases
- Technological Innovation and Cost Reduction
- Project Schedule and Time to Completion
- Supporting Documents/Appendices
- Applicant Data Input Spreadsheet
Application for 48C Certification (10/16/2009)
- Taxpayer information
- Contact person information
- One electronic version (CD) of Final Application
Requirements for Certification (within one year of IRS acceptance for certification)
- Taxpayer has received all federal, state, and local permits, including environmental authorization or reviews necessary to commence construction of the project
- Taxpayer has completed all the steps that must be accomplished during the one-year period beginning on the "acceptance date" in order for for the project to be placed in service within three years of the "date of issuance of certification."
- Taxpayer must comply with signature and declaration requirements
Metalforming Magazine Interviews Loch McCabe about Wind and Solar Energy Manufacturing Opportunities for Metalformers
In a special online issue of Metalforming Magazine, published July 2009, Editor Brad Kuvin interviewed Loch McCabe. Click here and flip to page 12.
The five page article covers the emerging large-wind, small-wind, and concentrated solar power (CSP) components manufacturing needs that metalformers can meet.
