The Obama Administration is actively working to develop an economic stimulus package that will contain significant efforts to jump-start the “clean technology” sector, including renewable energy technologies.  The current financial crisis has made it difficult, if not impossible, to obtain debt financing for renewable energy projects, bringing development of these projects to a screeching halt. 

Nevertheless, renewable portfolio standards (RPS) in more than 50% of the states across the country are legally effective, imposing on electric utilities the requirement that they provide a fixed percentage of their energy from renewable sources.  Also on the horizon are the prospects of a federal RPS and an economy-wide cap and trade greenhouse gas (GHG) regulatory system. 

These and other competing obligations have project developers and the financial community wondering how the new Administration can accomplish the twin goals of reducing GHG emissions and stimulating the economy.  ClimateIntel will be exploring the creation of a quasi-government agency - the Renewable Energy Private Investment Corporation (REPIC).  The REPIC, modeled after the Overseas Private Investment Corporation (OPIC), may provide a market-based mechanism to achieve the Obama team’s dual goals. 

This is not an entirely new concept.  In the 110^th Congress, a number of measures were introduced to stimulate financing of clean tech projects.  One Bill, S. 2730, the Clean Energy Investment Bank Act of 2008, would have established a government corporation to assist in the financing of clean energy and energy efficient technologies.  The Act would have authorized the bank to invest in projects related to the production or use of “clean” energy.  S. 2730, introduced by soon-to-be retired Sen. Domenici, went to hearing before the Senate Committee on Energy and Natural Resources, but no further.  As we explore REPIC, we will draw on the experience of Bill S. 2730 as well as similar measures.

For example, in considering the role REPIC could play, a quick review of Congress’ design in creating OPIC is useful.  Congress created OPIC “[t]o mobilize and facilitate the participation of United States private capital in the economic and social development of less developed countries in transition from nonmarket to market economies…” See Foreign Assistance Act of 1961, as amended, Section 231.  The statute authorized OPIC to assist U.S. project developers and lenders develop and finance projects in the developing world where commercial lending was either non-existent or considered too risky. 

The current financial crisis could serve a similar impetus in connection with the financing and developing of renewable energy projects that today, because of the crisis, cannot attract debt financing.  Moreover, the experience gained from OPIC would render a REPIC able to provide financial assistance in a sufficiently short time frame to have an impact on the economic crisis.   By creating REPIC and involving it in the financing of not only renewable energy projects, but also new technology, the Obama Administration could facilitate directly the development of new technology and projects, giving rise to “green” jobs and increased employment.

REPIC could provide a direct benefit to the economy generally and the renewable energy industry particularly until commercial lending becomes available again. REPIC could provide:

• direct loans to qualifying renewable energy projects;
• loan guarantees to commercial banks lending to qualifying energy projects;
• technology cover to projects that are economically feasible but involve a start up technology with no historical data to support it;
• project insurance; and
• a single source for project administration that would depoliticize the selection of projects to be funded or insured.

Over the next few weeks, ClimateIntel will analyze in more depth some of the issues that a REPIC would encounter and suggest how those issues might actually jump-start the renewable energy industry under President-elect Obama.

For further information about this topic, please contact Akin Gump.