California, where the sun always shines except when it doesn't, is implementing a tax-credit bond program specifically designed to fund renewable energy projects.
Another in the long line of the cumbersomely named "alphabet soup programs" that the state seems to love, CREBs, or clean renewable energy bonds, was jump-started by State Treasurer Bill Lockyer this week with the sale of $20 million of these bonds to install solar panels in 70 California Department of Transportation facilities.
California's Alternative Energy and Advanced Transportation Financing Authority (yep that's CAEATFA) sold the tax-credit bonds last week on behalf of Caltrans. They'll have a 1.45 percent interest rate over the 15-year term of the bonds.
Total debt service costs over that span will total $22.5 million, and over that period Caltrans will save $24.7 million on its energy bills. Over the 25-year lifespan pf the photovoltaic solar panels, energy costs savings will come to $52.5 million, Lockyer estimated, with $27.8 million coming after the bonds are repaid.
The deal is the authority's first use of the CREBs program, which was created by the Energy Tax Incentive Act of 2005. CAEATFA is also authorized to sell this type of bond under a similar program, called NCREB, established by the American Recovery and Reinvestment Act of 2009. The federal deadline for NCREB applications under ARRA is August 4.
Under the program, the federal government pays bondholders up to 100 percent of the interest directly in the form of a tax credit, and it allows borrowers to get financing with a minimal interest rate.
"This project is a great example of how to use innovative financing to green state government, make it more cost effective for taxpayers and bolster businesses and jobs in a vital sector of our economy," he adds.
A big chunk of money is available for the program: It has a volume cap of $2.4 billion. Besides solar, eligible projects include wind energy, closed-loop biomass, open-loop biomass, geothermal energy, small irrigation power, landfill gas, trash combustion, marine and hydrokinetic energy, and some hydropower facilities.
Projects must be owned by a "public entity," such as state or local government; public power provider; tribal government; or a cooperative electric utility company.
Is California once again showing the green way?