Alternative and Clean Energy Program
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Alternative Energy Investment Fund (state issued bonds)
In July 2008, Pennsylvania enacted a broad $650 million alternative energy bill designed to provide support for a variety of renewable energy and energy efficiency technologies. Included in this legislation was a provision authorizing the creation of a grant and loan program for alternative energy and clean energy production projects. The program is jointly administered by the Department of Community and Economic Development (DCED) and the Department of Environmental Protection (DEP), under the direction of Commonwealth Finance Authority (CFA). The most recent Program Guidelines were issued in October 2013 available here. Incentives are available to businesses (including non-profits), economic development organizations, and political subdivisions (e.g., local governments, schools, etc.).
The program will offer support for alternative energy and clean energy projects in the form of loans, grants and loan guarantees (i.e., grants to be used in the event of a financing default). Under this program, alternative energy production projects and clean energy production projects are governed by distinct sets of definitions and rules. Eligible activities for each type of project are described briefly below (see program rules for more detailed descriptions).
Clean Energy Projects
- Construction or renovation of a High Performance Building.
- Site preparation of a business park consisting exclusively of certified High Performance Buildings.
- Installation of equipment to facilitate or improve energy conservation or energy efficiency (including but not limited to heating, lighting, and cooling equipment). Equipment must be ENERGY STAR rated if applicable.
- Installation of an alternative energy system which produces energy from sources defined under the stateAlternative Energy Portfolio Standard (AEPS), including wind, geothermal, biomass, waste energy, hydroelectric, fuel cells, biologically derived methane gas, fuel cells, and biomass; but not including solar energy.*
- Replacement or enhancement of an existing energy system that utilizes nonrenewable energy with an energy system that utilizes alternative energy (as described above).
- Modification of the contract terms of an energy service project by a political subdivision pursuant to a new energy savings contract (ESCO) with a qualified provider under the Guaranteed Energy Savings Act (GESA) of 1996.
Alternative Energy Production Projects (construction or development of):
- An alternative energy project which produces energy from sources defined under the state Alternative Energy Portfolio Standard (AEPS), including wind, geothermal, biomass, waste energy, hydroelectric, fuel cells, biologically derived methane gas, fuel cells, and biomass; but not including solar energy.*
- A facility that manufactures or produces alternative fuels
- A facility that manufactures or produces products, including component parts that provide alternative energy (as defined above), improve energy efficiency, or conserve energy
- An alternative energy or alternative fuel R&D facility
- A project for the development or enhancement of rail transportation systems that deliver alternative fuels or high efficiency locomotives.
- Compressed Natural Gas (CNG) and Liquefied Natural Gas (LNG) fueling stations.
Both types of project allow eligible costs associated with the preparation of plans, specifications, studies, and surveys, necessary or incidental to facilitating or developing an eligible project, and costs (up to 2%) associated with administering a grant. The individual support mechanisms are described in more detail below. For all types of support, there is a general requirement that applicants provide matching funds equivalent to the funding offered under the program (i.e., incentives generally limited to 50% of costs).
Loans are available at interest rate caculated 250 basis point higher than the 10 year treasury bond (set at 5% for 2014). Loans may generally be amortized over a period corresponding to the life of the equipment, not to exceed 25 years, and must be repaid within 10 years. Loans for energy efficiency and energy conservation projects (including geothermal systems) have a 10-year amortization. Loans for manufacturing facilities are limited to $40,000 per job created within three years of loan approval. Failure to create the requisite number of jobs within three years may cause the interest rate to be raised by 3% over the remaining portion of the loan. Loans are also generally limited to $5 million, although higher amounts may be authorized on a case-by-case basis as determined by the DCED.
Maximum amount of grant for any alternative energy project or clean energy project is capped at $2 million or 30% of the project cost. Public Compressed Natural Gas (CNG) or Liquefied Natural Gas (LNG) can get a grant up to 40% of the project costs, while a private CNG or LNG facility can get a grant up to 25% of the cost. Grant for Home Performance Building is capped at 10% of the cost; $500,000 for energy saving contracts (ESCOs); and $175,000 for planning and feasibility studies. Grants for manufacturing facilities are available for up to $10,000 for every job created within three years of grant approval. Total maximum amount of financial incentive including combination of loans and grants for any project is limited to 50% of the total project cost.
Loan guarantees will take the form of a grant that may be used in the event of financing default on the part of the applicant. Loan guarantees are limited to 75% of the deficiency up to $5 million. The term of the grant may not exceed five years.
Special Session H.B. 1 authorized a total of $165 million for this program. Visit the program web site and review the funding guidelines for additional program details and application procedures.
*While solar energy is in fact eligible under the state AEPS, a specific solar energy program was also authorized as part of the enabling legislation and as a result solar energy projects have been excluded from some other programs created by the same legislation. The program guidelines do not list solar energy as an eligible technology. However, it appears that some solar technologies could qualify if they are incorporated into the broader design of a High Performance Building.