Faced with a national economic crisis, the U.S. Congress and the President made dozens of hard choices as they crafted emergency stimulus legislation. No industry emerged with deeper support than the alternative and sustainable energy sector, with the inclusion in the legislation of almost $60 billion in energy tax incentives, grants, loans, loan guarantees, and related initiatives.

The American Recovery and Reinvestment Act of 2009 (ARRA), as finalized by the Conference Committee, was passed by the U.S. Congress on February 13, 2009. Key provisions are designed to spur new investment in technology, accelerate energy conservation in buildings, upgrade the nation's transmission grid, and bring the tax-motivated renewable energy investments of "tax equity" financiers back to life. If cumulatively successful, the measures are probably big and bold enough, over time, to inject renewable energy and energy efficiency into almost every corner of the U.S. economy.

Given the length and detail of ARRA, Ballard Spahr has prepared seven sector-specific memoranda, each addressing how a different segment of the energy production, financing, and consuming industries will benefit from ARRA. These are introduced below, with links to each memorandum.

ARRA's strategy for energy-related stimulus is contained in a package of interrelated initiatives:

  • Extension and strengthening of critical tax credits that are the lifeblood of the solar, wind, and biomass energy industries;

  • Direct injection of billions of dollars of federal money into projects (via grants and loans), so that the industry need not stay idle while traditional investors recover their footing;

  • A range of specific policies to modernize the management and movement of electric power, via support for "smart grid" programs and new transmission investments to bring renewable energy to market;

  • Direct support of $11.3 billion for energy efficiency and weatherization programs to be managed or funded by state and local governments;

  • Numerous changes to the rules governing the issuance and funding of public sector and "private activity" bonds, which in the aggregate are meant to unlock credit for state and local governments, and many of which can be used to finance energy efficiency programs and renewable energy projects.

Surprisingly little horse-trading affected the design of these initiatives. The nuclear power industry briefly held out hope for a big increase in the loan guaranty program for nuclear power plants, but this fell by the wayside. The Department of Energy (DOE) was set to administer large new funding programs, but concerns over a history of bureaucratic bottlenecks caused a last-minute shift of the new tax-subsidy grant program to the Treasury Department, although DOE retained management of the renewable energy loan guaranty program. The Conference Committee cut back the support for research and development of new energy technologies, perhaps concluding that the resulting jobs growth would not be immediate enough. But when the Senate and House resolved their spending differences, only a relatively small reduction in renewable energy funding occurred.

For more details of ARRA, we have provided memoranda on a number of energy and sustainability topics described in the following discussion. Click on the embedded links in the descriptions below to access these memoranda.

  • The changes to the tax code, the strengthening of the Section 48 Investment Tax Credit, and the Section 45 Production Tax Credit, and the grant and loan programs to be administered by Treasury and DOE will be helpful to developers and investors across the renewable energy industry.  Click here  to see ARRA: Breaking the Funding Logjam for Renewable Energy Project Developers and Investors, and  click here  to see ARRA: Investment in Alternative Energy Technologies Receives Support.

  • ARRA facilitates a major increase in public-private partnerships and sponsorship of green energy projects by state and local governments. Click here to see ARRA: Major New Support for State and Local Government Sustainability, Renewables and Efficiency Initiatives. To review ARRA's tax-exempt bond changes, click here to see ARRA: Municipal Bond Provisions. The same types of ARRA measures, along with programs designed specifically for institutions, will be particularly useful to large non-profit institutions and campus-based facilities, such as universities and hospitals. Click here to see ARRA: Will Hospitals Get an Energy Education and Universities Get an Energy Transfusion?

  • For most of a century, U.S. electric utilities' profitability has hinged primarily on the volume of energy sales. ARRA includes a number of provisions that could begin to shift the model under which power is delivered and utilities make a profit. Incentives to develop "Smart Grids" and funding to strengthen and extend a sometimes-thin transmission grid both are meant to move power more efficiently to user loads and, as a result, to reduce gradually the need for construction of new power plants. Also, ARRA's enhancement of tax-credit and grant programs can certainly accelerate "green" capital investment by utilities. But the most far-reaching and continuing impact of ARRA on the utility business may be the "carrot" (in the form of access to substantial grant funding) for state regulators to "decouple" regulated utility profits from expansion of energy sales. For the details,  click here to see ARRA: Supporting Greener Electric Utility Investments and Rethinking the Regulatory Paradigm.

  • With so much emphasis in ARRA on energy efficiency in buildings, it is no surprise that the real estate industry will recognize multiple opportunities in the new legislation. Energy efficiency is not only an effective method for reducing national energy costs, but its implementation is often labor-intensive, producing a significant jobs impact. Developers and managers of significant real estate complexes will find a wide array of new initiatives to be more attractive today than they were before ARRA. For details,  click here to read ARRA: Conservation and Sustainability Moves Into the Mainstream for Office Buildings, Hotels, and Large Facilities.

The Ballard Spahr energy, finance, real estate, tax-exempt finance, and technology teams are ready to provide you with counsel in identifying opportunities, obtaining benefits, and supporting initiatives arising from ARRA. Each of the linked memorandum refers you to particular team members you can contact for assistance. For general information on ARRA's impact on your business, please contact Howard H. Shafferman (hhs@ballardspahr.com; 202.661.2205).

Copyright © 2009 by Ballard Spahr LLP.
(No claim to original U.S. government material)

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This newsletter is a periodic publication of Ballard Spahr LLP and is intended to alert the recipients to new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer concerning your situation and specific legal questions you have.