by Grace Kurdian

As I sat in the morning conference session of RETECH 2009 and listened to the line-up of speakers, I couldn't help but think that for the renewable energy industry, this is much more than a conference/expo; this could be the equivalent of Davos (though more broadly accessible) in terms of bringing together leaders from industry, government, NGOs, and legal and other professional services to discuss the status of the industry, critical issues and where we are moving in policy and legislation.  Disclaimer: I haven't ever even been invited to Davos (but would go if asked). 

The speakers at RETECH include international experts, CEOs and presidents of non-profits in the climate change, renewable energy, and energy efficiency areas, and high profile individuals such as Wesley Clark, speaking on national security and renewable investment from a business perspective, as well as Dan Reicher, the director of climate change and energy initiatives for Google. 

The mood is varied, mostly ranging from ebullent celebration of the confluence of events, including the leadership of President Obama and the public, grass roots attention being given to climate change and renewable energy, to a more cautious optimism that there are still many issues that must be addressed before we can successfully achieve the ambitious goals established on various state and regional levels (soon to be followed on a federal level) with regard to renewable energy and carbon emission reduction. 

Much of the excitement, of course, comes from the federal stimulus dollars targeted toward renewable energy, energy efficiency, a smart grid and all related energy issues. While there is certainly mention of the economic downturn and its impact on financing projects, the sense of optimism is palpable. 

However, if you think all the answers lie here at RETECH, think again. Many issues await legislative action or direction.  For example, issues remain as to what the new smart grid will encompass and who (federal government through FERC or other federal entity or state utility commissions and regional compacts or a combination of these) will have jurisdiction and responsibility for transmission related to the renewable energy grid expansion and build-out.  As demonstrated by the speakers from various sectors, the delicate balance of providing some regulatory certainty while encouraging the entreprenurial spirit in technology, financing, and the like is still a challenge. Interestingly, there are also relatively new topics, such as decoupling, that have entered the industry discourse although most, if not all, state utility commissions have yet to address such proposals.

Issues of particular concern come as no surprise to those in the industry.  Transmission and siting, storage, local and regional regulatory processes related to environmental and zoning matters, regulatory signals/certainty, and finance are all high on the agenda, sobering the more optimistic discussions of what the technology to date can achieve once implemented.

Overall, however, unlike the mood at Davos, which by all accounts was more somber than in past years, the tone here is at the very least cautiously optimistic even despite the recognized challenges that lie ahead.

Our special counsel, Paul Cellucci, is the former ambassador to Canada.  We caught him right after President Obama’s trip to Canada and asked a few questions.

What’s the bottom line on President Obama’s meetings with Prime Minister Harper?

Clearly the President went to Canada to collaborate and not to confront. We saw that dramatically in his comments on the scary Buy American provisions of the stimulus bill. He told Canadians that worldwide recession is not the time to start restricting trade. He pledged that the U.S. would abide by all of its international obligations. Given all the campaign talk about renegotiating the NAFTA treaty, this was received as very good news.

Where did the U.S. come down on oil sands?

In the discussions of U.S.-Canada energy and environmental issues, the most significant thing the President did was to compare oil sands to the situation with coal in the U.S. He noted that both have a big carbon footprint, but that they are providing the energy we need to power our economy. He said we need to work together on developing alternative energy sources and on improving carbon sequestration and other technologies that can contain the damage of carbon-heavy fuels. He noted that NAFTA partner Mexico is also doing a lot on work in these areas.

There was much concern in the Canadian press that President Obama wanted to restrict imports of oil from oil sands. Now it looks like we’re not going down that road, just as we're not going to shut down all our coal-generated electricity plants overnight and destroy our economy. He understands that we get 20% of our imported oil from Canada. More than from Saudi Arabia or Venezuela or any foreign country. And a lot of that comes from oil sands.

U.S. attitude to oil sands is a very sensitive issue in Canada, especially since Henry Waxman took over leadership of the House Energy and Commerce Committee. Waxman led the charge against so-called "dirty fuels" purchases by the U.S. government. He is responsible for the Section 526 provision of the Defense Authorization Bill that forbids the military from buying oil sands oil.

What is the status of U.S.-Canada cooperation on cap-and-trade plans?

There is no formal agreement yet but they are definitely talking about working together on climate change issues. It’s pretty clear to me that the President is going to continue to make climate change a top priority, despite the current focus on the economy. He mentioned it four times in his Inaugural Address. This is a priority for him.

Actually, the U.S. and Canada have been working on these issues continuously since 2001, when they formed working groups. Along with Mexico, there is a trilateral agreement which serves as a framework for stimulating renewable energy development, innovation in clean coal and carbon capture, improving electric transmission capacity and harmonizing energy standards in the NAFTA countries.

Given what the President of Mexico, as well as Prime Minister Harper and President Obama. are saying, there’s a lot of institutional momentum for a coordinated North American approach to climate change and environmental issues.

By Frances Ruml Beckley

The American Recovery and Reinvestment Tax Act of 2009 was signed into law by President Obama today.  It includes several significant extensions to existing incentives for clean energy and also some new programs.  The legislation is estimated to be worth almost $20 billion to renewable energy industries over the next decade.  Even the most jaded amongst us has to agree that that's enough for quite a few solar panels and windmills and biomass engines.  When compared to prior law, more of the incentives are provided in the form of immediate credits (investment credits versus production credits) or, in some cases, even grants in recognition of the difficulties of obtaining financing during the current economic downturn.

Production Credits

Credits for production of electricity from alternative energy sources under Section 45 of the Internal Revenue Code have been extended:  from 2009 to 2012 for wind projects, from 2011 to 2013 for marine and hydrokinetic renewable energy facilities, and from 2010 to 2013 for most other qualifying facilities (open- and closed-loop biomass, geothermal, solar, landfill gas, municipal solid waste, and qualified hydropower).

Investment Credits

During the same years that the extended production credit will be available, a new provision will permit a taxpayer to elect to take the investment credit under Section 48 in lieu of the production credit under Section 45 for almost any project that would qualify for the production credit.  The Section 48 investment credit for these projects will be available for thirty percent of the cost of qualifying equipment in the year that the projects are placed in service.  As under prior law, the taxpayer cannot take both credits but must choose between the Section 45 production credit and the Section 48 investment credit for each project.  An election to take the Section 48 investment credit will be irrevocable.

The Section 48 investment tax credit also is expanded by permitting taxpayers to claim the full amount of the credit for eligible property that has been funded by subsidized energy financing or industrial development bonds.  Under prior law, the portion of the equipment purchased with those types of subsidized financing was not eligible for the credit.

A brand new credit is created for investments in qualifying advanced energy projects, which will be codified as Section 48C.  Qualifying advanced energy projects are essentially facilities to manufacture alternative energy equipment such as wind turbines, solar panels, energy storage systems for electric cars, electric grids to support the storage or transmission of renewable energy, equipment that captures and sequesters carbon dioxide, and any other designated technology to reduce greenhouse gases.  The credit would be thirty percent of the investment in eligible property, which generally is depreciable tangible personal property necessary for production of the alternative energy equipment.  The credit generally will be available in the year the project is placed in service, with some exceptions for qualified progress expenditures.  Taxpayers would have to apply for certification of a project and the project’s potential to create jobs as well as its potential to reduce pollution will be considered.  Credits under the program will be limited to $2.3 billion.  Projects receiving credits under Sections 48 or under the special investment credit provisions for qualifying advance coal projects or qualifying gasification projects are not eligible for this credit.

Grants

In addition to these expansions of the credit programs, the legislation provides that most taxpayers that would qualify for the Section 48 investment credit (including those electing that credit in lieu of the Section 45 production credit) can choose instead to apply for a grant in the amount of the Section 48 credit they would otherwise have received.  To be eligible, projects generally must be placed in service during 2009 or 2010 or must be started during 2009 or 2010 and completed before the expiration of the investment credit.  The grants are subject to the same dollar limitations that would apply to the investments credits.  Grants are not available to non-taxpayers such as local governments or non-profit organizations.  A taxpayer cannot take either the production or the investment tax credit for a project for which it has received this grant.  The grants are not taxable income to the taxpayer.

The legislation also increases the amount of new clean renewable energy bonds by $1.6 billion and the amount of qualified energy conservation bonds by $2.4 million.

There is a lot of money flying around here.  Hopefully it will keep the fledgling renewable energy industry in the air and help get the economy off the ground.

NEWARK, Feb. 6 -- Carrier Clinic, a Belle Mead, NJ-based healthcare center, recently signed a contract with a solar developer that allows the non-profit institution to benefit from federal renewable energy investment tax credits and other renewable incentives with a state-of-the-art financing structure.  The contract supports development of a large-scale solar photovoltaic array that will provide up to 50% of the electrical power for the not-for-profit healthcare provider for 25 years.

Institutions interested in tapping into renewable energy are increasingly turning to the so-called power purchase agreement model as a financing tool that allows the third party to benefit from the renewable energy tax credits and invest in the system development while the institution benefits from receiving a long-term supply of clean power without outlaying capital of its own.

The innovative structure allows even a non-profit organization to enjoy indirect benefits from federal and state tax incentives that promote investments in renewable energy and the growing green jobs economy.

Under the Power Purchase Agreement announced this week, enXco, an EDF Energies Nouvelles Company, will begin construction this spring of the up-to-1.9-megawatt project, which will be owned and operated by enXco to supply Carrier on a net-metering basis. The project, which will be the largest solar system on a New Jersey hospital campus, qualifies for New Jersey Renewable Energy Certificates.

"Successful renewable energy projects on this scale will require new business models and financial structures as much as new technology," said Susan Feeney, a Newark office tax partner and member of McCarter's Climate Change and Renewable Energy Practice Group. "We hope this will be a model for future development."

The Carrier Clinic team also included Hartford-based Stephen Humes, co-chair of the climate change group, who handled the power purchase agreement and energy regulatory issues, and Newark partner Edward Butler on leasing and other real estate issues.

Carrier Clinic is a private, not-for-profit behavioral healthcare system which specializes in psychiatric and addiction treatment. Carrier's system includes an inpatient psychiatric hospital, a detoxification and rehabilitation center, an adolescent residential facility and a fully accredited middle and high school for students classified as emotionally disturbed.

McCarter & English, LLP's Climate Change and Renewable Energy Practice team draws from the firm's energy and utilities, environmental, tax, real estate, insurance coverage, litigation, and intellectual property lawyers to address the myriad legal needs of our clients. Members of the team are leading members of American Bar Association committees that focus on climate change and have participated on national and international panels that are educating lawyers in this emerging area of the law.