The farm bill and its impact on financing renewable energy

The first Farm Bill was introduced in 1933 for the overall purpose of ensuring that everyone had enough to eat, farmers earned a living, and that the soil and water stayed healthy. A new Farm Bill is written, debated and passed every five to seven years. Since 1933 15 different versions of the Farm Bill have passed. The 2008 Farm Bill, called the Food, Conservation and Energy Act, authorized $289 billion in spending over five years.

Every Farm Bill is comprised of different titles, each of which covers a different set of programs (e.g., Energy, Bioenergy programs, renewable energy systems). The Energy title was added in the 2002 incarnation of the Farm Bill. Since then, USDA renewable energy programs have been used to incentivize research, development, and adoption of renewable energy projects, including solar, wind, and anaerobic digesters. However, the most recent primary focus of USDA renewable energy programs has been to promote U.S. biofuels production and use.

The $288 billion 2008 Farm Bill (aka the Food, Conservation, and Energy Act of 2008) was a continuation of the 2002 Farm Bill and provided funding for the following renewable energy programs:

Biobased Markets Program: Continues the federal preference for procurement of biobased products and the biobased products labeling program
Biorefinery Assistance: Loan guarantees to produce advanced biofuels
Repowering Assistance: Encourage existing biorefineries to install new energy systems to use biomass for heat and power
Bioenergy Program for Advanced Biofuels: Incentives for next generation biofuel production
Biodiesel Fuel Education Program: Education and outreach on biodiesel use
Rural Energy for America Program (REAP): Grants and loan guarantees for energy efficiency and renewable energy
Biomass Research and Development: Supports advanced research to improve bioenergy
Rural Self-Sufficiency Initiative: Cost-share grants for rural communities to develop and implement energy self-sufficiency initiatives
Feedstock Flexibility Program: Sugar import management program
Biomass Crop Assistance Program (BCAP): Assistance to stimulate energy crop plantings
Forest Biomass for Energy: Research on use of low-value forest biomass
Community Wood Energy Program: Grants for rural communities to install wood energy systems in community facilities
Biofuels Infrastructure Study: Study of the infrastructure needs associated with the production and use of biofuels
Renewable Fertilizer Study: Study potential to produce fertilizer from renewable energy
Parts of the 2008 Farm Bill expired September 30, 2012 but the American Taxpayer Relief Act of 2012 (January 2, 2013) extended most aspects of the 2008 farm bill for one additional year until September 30, 2013. This date has of course since passed and expiration has become an issue again since Congress has not yet agreed to a new farm bill or extended the current one beyond 2013. All of the major farm bill energy programs lack baseline funding going forward.

A bicameral team of 41 lawmakers is charged with merging farm bills passed this summer by the House and Senate into one piece of legislation to create the Agriculture Reform, Food and Jobs Act of 2013. However, negotiations are currently hung up on a number of points, including a $35 billion gap between the two sides on food stamp spending and the apparent reluctance of each side to budge from its position.

For those involved in renewable energy, the Farm Bill Energy Title programs are of particular interest. The Farm Bill Energy Title programs help rural communities access investment capital to build new markets and create new jobs and other economic opportunities. For example, the Bioenergy Program for Advanced Biofuels program provides funding to support research, investment and infrastructure necessary to build a biofuels industry that creates jobs and produces renewable fuel. Since 2009, more than 275 eligible producers in 44 states have received payments. Similarly, the Biomass Crop Assistance Program (BCAP) enables farmers to develop next-generation energy crops from non-food sources, thus creating new farm income sources. According to the most recent USDA figures, BCAP supports more than 860 growers in 188 counties across 12 states, enabling them to convert approximately 59,000 underutilized acres to energy crops.

As another example, the Rural Energy for America Program (REAP) is a widely utilized program under the Energy Title. REAP provides financial assistance to agricultural producers and small businesses in rural communities to purchase, install, and construct renewable energy systems; make energy efficiency improvements to non-residential buildings and facilities; use renewable technologies that reduce energy consumption; and participate in energy audits, renewable energy development assistance, and feasibility studies. USDA says that the 7,600 projects REAP supports employ nearly 18,000 people and generate or save more than 7.3 billion kilowatt hours of electricity.

The lack of a deal on the 2013 Farm Bill — combined with the spending cuts mandated by the sequester earlier this year — has cut into funding for renewable energy programs and created a state of uncertainty about the future. For instance, as a result of the sequester funding for the REAP program was reduced by about $1.4 million and the Advanced Biofuel Payment Program was reduced by about $3.3 million. These cuts represent a 5.1 percent reduction in funding over previous year figures. The impact of these reductions are fewer projects will be able to be funded under REAP and all 260 producers who have applied under the Advanced Biofuel Payment Program will see a proportional reduction in the amount of funding they receive. As of right now, most of the renewable energy programs that were authorized in the 2008 Farm Bill are currently unfunded as the funding provided in that Act has been exhausted.

The USDA says that a new Food, Farms and Jobs Bill is necessary in order to provide additional mandatory funding for these important programs. Secretary Vilsack has repeatedly expressed the need for a comprehensive Food, Farm and Jobs Bill to support renewable energy projects in rural communities, keep up momentum in American agriculture, grow the rural economy and create jobs. Without a new five-year bill, producers, rural America will suffer.

There are two different versions of the Farm Bill under consideration — the Senate-assed version (S.954) and the House-passed version (H.R. 2462). Both the Senate-passed and House-passed bills extend most of the renewable energy provisions of the farm bill, with the exception of the Rural Energy Self-Sufficiency Initiative, the Forest Biomass for Energy Program, the Biofuels Infrastructure Study, and the Renewable Fertilizer Study which are either omitted or explicitly repealed by both bills.

In addition, S. 954 omits the Repowering Assistance Program, while H.R. 2642 adds a new reporting requirement on energy use and efficiency at USDA facilities. Otherwise, the primary difference between the House and Senate bills is in the source of funding. Over the five-year reauthorization period (FY2014-2018), the Senate bill contains a total of $880 million in new mandatory funding and authorizes $1.140 billion to be appropriated for the various farm bill renewable energy programs. In contrast, H.R. 2642 contains no mandatory funding for these programs, while authorizing $1.405 billion over the five years, subject to annual appropriations. In addition, the House bill eliminates all support for the collection, harvest, storage, and transportation (CHST) component of Biomass Crop Assistance Program (BCAP), severely limiting its potential effectiveness as an incentive to produce cellulosic feedstocks.

The House and Senate recently came together in a rare show of bipartisanship and approved a new overall spending budget. For those of us keeping on eye on renewable energy funding, this is a small sign of hope that a new Farm Bill is on the horizon.

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California decision may speed up energy efficiency financing

A new market shaping decision found the California public utilities Commission (CPUC) on Sept. 19. The State dependence of private capital for energy efficiency, to increase the funding, the CPUC has provided private utilities $65.9 million for a suite of pilot finance programs for the State. California diversified approach could lead to original solutions, which other States could adopt.

"It's a very aggressive effort", said Frank Spasaro, head of the energy efficiency partnerships and financial Sciences at the Southern California gas company.

Most new programs offered by all State major private utilities. California has other great use, but they are not part of the CPUC decision.

"We have much effort into things that are market transformative," said David Nemtzow, Rector of Nemtsov & associates. "You can imagine it as a catalyst."

Taxpayers use the new suite of programs to access private capital funds. The programs will go on at the same time financing challenges from many angles. It tests a wide range of financing approaches to discover how to effectively perform. Utilities can later, as they by their experiences during the pilot phase these programs expand.

"This is a pilot project to learn how the market reacts in different ways to see," Nemtsov said. "Will lead it to lower interest rates [or] different terms? Borrowers will be more willing to lend? These are the things, which we want to test."

It has been somewhat controversial, that on-Court programs require repayment of the written consent of buyers of commercial real estate if the properties are sold. After Brad Copithorne, energy and financial policy specialist at Environmental Defense Fund can this feature be discouraged investment, because some lenders prefer loan, which are automatically transferable.

The new financing of programmes includes three residential and three non-residential programs.

Residential programs include an energy efficiency finance items fee, a master-metered more families pilot program with Bill-repayment and a single-family house direct loan program.

The non-residential programs include two on-Bill-repayment programs for companies and a small-business area on Bill repayment of lease provider program (for equipment leasing).

New residential programs

Energy efficiency post free finance program offered by Pacific gas and electric company. Participants will be on line article-to-/ discounts on their electricity bills to pay back. Private investors will finance the loans.

Even if participants do not pay their bills, California will protect them law breakers. According to Spasaro if homeowners partial payments, these payments applied to other duties on the Bills before they are applied to the energy-efficiency loans.

The master metered more families pilot program with Bill-repayment is designed for the affordable housing market. This program connects private investors with multifamily owners who strive, retrofit their buildings more energy efficient. (A master is meter an electricity meter, serve several households.)

California Spasaro said affordable housing market is fairly limited, so it is difficult to develop effective programs for this sector. He said community development, which involved financial institutions, to create this program.

Spasaro said that this program in the price can provide heating included, discounts and solar water. Credit enhancements are probably to be expected. (Incentives offer credit enhancements for lenders to improved conditions for projects to offer.)

The CPUC decided that this program does not require that loan recipient enough energy to financially break save each year. (This requirement is also known as "Bill neutrality.") Program participants who do not their credit payments will be protected from interruptions.

The House direct loan program is a loan program, provides the private capital for low to middle income homeowners. The program was expanded to allow both direct and indirect loans. There is a provision for outstanding claims loans lenders protect, in case that some loans will not be repaid.

New non-residential programs

The two on-Bill-repayment programs for company records grant private capital from lenders to energy-efficiency loans. One of the programs is for small businesses, while the other programme covers the rest of the industry.

The small-business program is aimed at organizations that have difficulties with the procurement, energy efficiency financing.

The medium to large business program covers various approaches to energy efficiency, including the distributed generation and demand response. (Demand response programs energy consumption of a company customize, so that it is better makes in accordance with the, the utilities provide.) This company can be more energy efficient.)

Electrical service can be separated in both programs, if companies fail to make loan payments. When companies make installment payments, these payments will be split the cost of energy and their loans. These programs will include loan loss reserves as a credit enhancement.

An attempt to engage, Spasaro the equipment leasing market said the small businesses on-Bill-repayment leasing provider program. "We think there is a very large effort that goes in the area of leasing." It will be a competitive tender, any plants to find leasing providers.

Existing programs

The existing on-account-financing programs use funds collected from utilities by the taxpayer to energy efficiency financing support. The CPUC modified decision these programs so that they will reduce their focus on lighting. Spasaro said that these programs have waiting lists.

The new generation of pilot programmes these programmes in the area of the on account repayment, search go a step further private capital to the energy efficiency retrofit support.

Data management

Requires California new mediator - so-called organisational "hub these programs" for data and financial information set up sharing. This hub is the California hub for energy are called efficiency financing (Mamadou) and California are running from the alternative energy and advanced transportation Financing Authority (CAEATFA).

Spasaro said the CHEEF activities responsible for the management of the master servicer, credit enhancements and loan performance data.

The CHEEF will stand between the utilities and the financial organizations and handle their transactions and data. Exchange of information between these organisations will be expected to be very complex. California adopts an IT system that can process these transactions, find other States copy it a useful model.

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PACE Financing Concept Provides Hope for Renewable Energy Projects

Simon Property Group Inc., the largest U.S. shopping mall owner, and Prologis Inc. the world’s biggest warehouse owner, are among borrowers funding projects from rooftop solar panels to energy-savings systems using so-called PACE financing. PACE bonds, sold by cities to investors, are repaid over decades by property owners through their real estate taxes.As banks become less eager to provide long-term capital for renewable energy, PACE bonds offer a way for property owners to fund projects and for investors to capitalize on clean power. Formally known as property-assessed clean energy, the format failed to catch on big with homeowners and is making headway with commercial borrowers. Agencies that arrange these types of loans estimate more of them will be made in 2013 than in the past four years combined.

“This will be the year that we start seeing deal flow,” said Jessica Bailey, director of a PACE program in Connecticut that began arranging loans in January. “This will be the year where the concept of PACE as security for investment is proven out.”

Deutsche Bank AG estimates that U.S. building owners will spend $280 billion through 2022 on systems that reduce power bills, including LED lighting, solar panels and software that manages electricity usage.

Assessment Bonds

The PACE model is an update of so-called special assessment bonds, a financing tool devised more than 100 years ago to fund infrastructure projects that are repaid through property taxes.

There may be a record $150 million in PACE loans extended for rooftop solar panels, energy-efficient LED lighting and power-management systems this year, according to David Gabrielson, executive director of PACENow, a Pleasantville, New York-based advocacy group. It’s an example of the new sources of financing that have been created in recent years as investors show growing interest in renewables.

PACE loans had a slow start since the first program was created in Berkeley, California, in 2008, partly because of doubt over their treatment in defaults. They have supported just $121 million of clean-energy projects at U.S. residential and commercial buildings in six states, according to estimates from PACENow.

In contrast, about $17 billion in special assessment bonds were issued for projects such as street lights, community centers and underground water systems just in the past decade, according to data compiled by Bloomberg.

Prologis Project

Prologis began its first PACE-funded project in November, a $1.6 million effort at its San Francisco headquarters that includes energy-efficient lighting and rooftop solar panels. The company is considering similar financing for retrofits at some of its Southern California buildings, according to Aaron Binkley, director of sustainability programs.

“Our hope is that in a short amount of time the market far eclipses this one individual, small project and there’s a lot more volume,” Binkley said. The San Francisco project is expected to reduce the building’s energy use by about a third, shaving off $98,000 in annual costs.

Clean Fund LLC, a San Rafael, California-based company that provides PACE financing, funded 90 percent of the project by buying a 20-year PACE bond that pays 6.93 percent, according to Managing Director Derek Brown. That’s more than double the yield on 30-year U.S. Treasury bonds, which are about 2.87 percent.

“It’s got a really nice yield” that’s taxable by the federal government and not the state, he said.

Residential Disputes

PACE financing was initially intended to fund residential and commercial projects. Loans to homeowners sparked legal disputes over concerns that debts used for clean-energy projects may take priority over mortgages in a default.

PACE programs are now focusing on business properties, a move that may spur widespread use, said Bailey, from the Connecticut Property Assessed Clean Energy program. The state has 36,000 commercial buildings, and retrofitting a tenth of them with systems to cut their power bills by about 20 percent will take at least $164 million in investments, she estimated.

More Projects

The program may finance about $20 million worth of projects within six months to a year. Wells Fargo & Co., Citigroup Inc., Clean Fund and Ameresco Inc. are among the eight lenders that have agreed to provide loans.

Simon Property of Indianapolis, Indiana, used about $2 million in PACE financing for three energy-efficiency projects in California and Ohio. The long repayment period makes the loans attractive, said George Caraghiaur, Simon Property’s senior vice president of sustainability.

“You can finance these projects over a long enough period of time that the energy savings pay for the assessment,” he said in a phone interview. “It makes sense.”

Once PACE financing becomes more widespread, the debts may be bundled together, Caraghiaur said. “Ultimately, they’ll be able to securitize these loans in bigger chunks and sell them off like mortgage-backed securities,” he said.

“That’s the big goal, to bundle a bunch of these PACE loans together and create a secondary market,” said Clay Nesler, vice president of global energy and sustainability at Johnson Controls Inc., the energy-efficiency technology provider that’s working on the Prologis project.

Twenty-eight states and the District of Columbia have approved the use of this type of financing and there are 16 programs arranging loans in seven states, according to Nesler.

“We are very hopeful that 2013 is a bellwether year for this,” he said.

Ygrene Energy Fund Inc. arranges PACE loans in Sacramento, California, and expects to expand into Miami and Atlanta later this year, according to President Dan Schaefer.

“We’ll probably have 1,000 contractors on board by the middle of this year,” Schaefer said. “We think it’s going to be an incredibly powerful momentum builder for us.”

Copyright 2013 Bloomberg

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Report from the Commission provides recommendations, to double US energy efficiency financing

The Commission's action plan would use funding programs and policies, capital to support billions of dollars in savings to unleash hundreds of billions of dollars.
According to the Commission, energy savings contracts for services and utility energy service contracts, focusing on government buildings, are the most important energy efficiency of financing methods on the market involved. Although these models work well, its scope is not wide enough, to nationwide have far-reaching effects on energy efficiency.

To open the door to new energy efficiency funding, the Commission recommends:
Create a secondary market for efficiency Loanssetting State and local programs to resell loans to investors in secondary Marketsinitiating on Bill-repayment and on-Bill financing Programsimproving federal regulations financing efficiency through property taxes and Trustsattaching energy efficiency incentives for Mortgagessetting, control strategies for the promotion of investment of in Efficiencyincreasing the industry real estate buyers to assist customers with their energy use data awareness through ratings and Informationproviding

Creating a secondary

Since there is no uniform system for the evaluation of these loans, there are no robust secondary market for energy-efficiency loans. On the secondary market, investors purchase loans have already been issued. When institutional investors could buy large amounts of energy-efficiency loans, would create a market for energy efficiency loans.

To remove this barrier and investors, access to the market, recommends that the Commission produced consistent underwriting guidelines, contract, language and data requirements for energy efficiency investments.

The report also recommends that State and local governments set up programs, sell to groups of loans to investors on the secondary market. These programs would be similar to the new camp for energy-efficiency loans (wheel)-program.

Revision of guidelines and to initiate programs

New State and local programs can on invoice refund or taxes to finance energy efficiency. On-Bill-repayment programs offer customers the option to pay improvements in energy efficiency in the course of time through their utility bills. Third lending figures for the investment costs. On invoice financing programs programs are similar to the repayment account, but by the utility or taxpayer capital financed.

Revision of federal regulations could develop energy efficiency financing easier. In real terms, for example, a possible tool for efficiency are estate investment trusts.

Improvement of federal regulations, that of residential property assessed clean energy the current roadblocks would remove (PACE), which interfere with these programs. There are no federal restrictions to commercial speed.

Federal regulations can build energy efficiency incentives in mortgage programs. If programs of incentives for energy efficiency include mortgage, would the housing market towards more efficient decisions draw. It would also people their homes upgrade before selling them stimulating.

Federal tax rules change could encourage industries to make investments that could support energy efficiency. This policy could also target specific energy efficiency improvement measures.

Efficiency to visualize information

The Commission recommends that awareness of the energy efficiency at national level. A step towards improving public understanding of energy use is to make energy data transparent, available and easy to understand. It is also important for the financial markets, which require high-quality data on the actual energy savings, associated with different types of energy-efficiency projects.

Energy efficiency rating systems for building real estate buyers and sellers to a Visual stimulus energy can give attention. Manufacturers can also reviews for appliances and other products.

Utility customers and third can track access to standardised energy data customers authorize their energy savings. For this approach, to succeed State agencies would have to set up rules to ensure the privacy of our customers.

This story was originally published by the Energy Finance Center (CEFC) clean. You can subscribe future stories from the clean energy source for financial services by visiting the CEFC-news page.

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Can pace local energy financing come back?

It can be with your help; Give a comment to the FHFA from Thursday, Sept. 13!

Effectively released suspension living PACE energy and municipal financing of such programmes in 2010 will make renewable energy a lawyer and a revised rule, this obliged the Federal Housing Finance Agency (FHFA) the revised decision on pace programs [PDF] earlier in this summer.

They returned from their 2010 claim that pace presented a risk to mortgage-holders such as Fannie Mae and Freddie Mac?

In short, no.

The ruling States:

The company immediately take such actions are necessary, to secure or maintain their right to immediately make due to the full amount of the commitment through a mortgage, if mortgage covered by without the consent of the holder a first lien, secured speed obligation...

The companies [Fannie and Freddie] must not purchase mortgage, which is the subject of a first-lien speed obligation...

The companies will not agree, the imposition of a first-lien speed commitment mortgage.

In other words, h b. No. So always living pace nor is dead, and it is not clear as something less than replacement at the top of the FHFA is could make a difference.

Find pace, what. You can also read the ILSR report on the lessons 2010 learned from early pace programs, or trying to feel better by it with laughter.

This post originally appeared on the ILSR energy self reliant Statesblog.

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Ma' aden's $1B bauxite refinery gets pledge financing

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