Financing Public Sector Projects with Clean Renewable Energy Bonds; Fact Sheet Series on Financing Renewable Energy Projects, National Renewable Energy Laboratory (NREL) Page: 1 of 6
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Financing Public Sector Projects with Clean
Renewable Energy Bonds (CREBs)
Clean renewable energy bonds (CREBs) present a low-cost
opportunity for public entities to issue bonds to finance
renewable energy projects. The federal government lowers
the cost of debt by providing a tax credit to the bondholders
in lieu of interest payments from the issuer. Because CREBs
are theoretically interest free, they may be more attractive
than traditional tax-exempt municipal bonds.
In February 2009, Congress appropriated a total of $2.4 billion
for the "New CREBs" program. No more than one-third of
the budget may be allocated to each of the eligible entities: (1)
governmental bodies, (2) electric cooperatives, and (3) public
power providers. Applications for this round of "New CREBs"
were due to the Internal Revenue Service (IRS) on August 4,
2009. There is no indication Congress will extend the CREBs
program; thus going forward, only projects that are already
approved under the 2009 round will be able to issue CREBs.
This factsheet explains the CREBs mechanism and provides
guidance on procedures related to issuing CREBs.
On October 27, 2009, the U.S. Department of the Treasury
announced the allocation of $2.2 billion of issuing authority
for "New CREBs" to successful applicants. Per IRS Notice
2009-33, the IRS plans to reallocate any unallocated volume
cap as well as any relinquished or reverted allocations.
Because $191 million of the volume cap for electric coopera-
tives was not allocated on October 27, there may be a supple-
mental allocation round for cooperative projects.
* 2005. CREBs were created under the Energy Tax Incentives
Act of 2005 (and detailed in Internal Revenue Code Section
54). The CREBs program was funded at $800 million.
* 2006. Legislation increased total CREBs funding to $1.2
* 2008. The Energy Improvement and Extension Act of
2008 (the "Energy Act") authorized $800 million of "New
CREBs" funding and extended the issuance deadline for
existing CREBs by one year to December 31, 2009.
* 2009. The American Recovery and Reinvestment Act of
2009 (the "Recovery Act") increased the "New CREBs"
allocation by $1.6 billion, bringing the "New CREBs" total
to $2.4 billion.
How it Works
With CREBS, a type of tax credit bond, the investor receives a
tax credit from the U.S. Department of the Treasury (Treasury
Department) rather than an interest payment from the issuer.
However as discussed below, in many cases the tax credit
provided to investors has been insufficient and investors have
required issuers to pay supplemental interest payments or
issue their bonds at a discount. Tax credit bonds differ from
traditional tax-exempt municipal bonds in several ways.
* Tax-exempt municipal bonds. The issuer makes cash inter-
est payments. The federal government exempts this interest
income from federal taxes, thereby allowing an investor to
offer bond rates that are lower than those for a corporate
bond of similar credit rating.
* Tax credit bonds. The federal government provides the
investor with tax credits in lieu of interest payments from
the borrower, theoretically subsidizing municipal borrow-
Application and Allocation Procedure
The CREBs program is administered by the IRS. Each time
Congress makes a CREBs authorization, the IRS issues guid-
ance soliciting applications from qualified entities with quali-
fied projects. In April 2009, the IRS published an application
and related guidance for securing "New CREBs" allocations
(U.S. Department of Treasury 2009a). These applications were
due to the IRS on August 4, 2009. Projects eligible for alloca-
tions include facilities that generate electricity from a variety
of sources including, wind, solar, closed-loop biomass,
open-loop biomass, geothermal, small irrigation, qualified
hydropower, landfill gas, marine renewables, and trash com-
bustion. Projects that receive allocations in this round will
have three years to issue the bonds.
The Energy Act specifies that up to $800 million will be
awarded to each category of applicant: governmental bodies,
cooperative electric utilities, and public power providers. For
governmental bodies and electric cooperatives, the Treasury
Department will make awards to eligible projects, from
smallest to largest project, until either the $800 million for
each category has been exhausted or all applications have
been granted. Awards to public power providers, namely
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Kreycik, C. & Couglin, J. Financing Public Sector Projects with Clean Renewable Energy Bonds; Fact Sheet Series on Financing Renewable Energy Projects, National Renewable Energy Laboratory (NREL), report, December 1, 2009; Golden, Colorado. (digital.library.unt.edu/ark:/67531/metadc933350/m1/1/: accessed February 22, 2019), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.