Renewable Energy Loan Programs

Publication Type

Case Study

Date Published

09/2002

Authors

Abstract

Several states offer loans targeted at renewable technologies. Although financing does not reduce the capital cost of a project, by spreading payments out over a long timeframe, financing can make projects more affordable. This case study first reviews experience with the Oregon Energy Loan Program, one of the more durable and innovative loan programs offered in the U.S. for renewable energy technologies. The case then describes the features of renewable energy loan programs in Idaho, New York, Ohio, Pennsylvania, and Wisconsin. These additional states are featured to demonstrate the range of possible loan program designs and to identify innovative design features. Innovative Features An increasing number of states are developing loan programs specifically targeted to renewable energy. This case study posits that the ideal renewable energy loan program (from the perspective of gaining broad market acceptance, especially among residential customers) would have four main attributes:

  • long repayment term,
  • low interest rate,
  • low hassle and administrative fees, and
  • unsecured.

Loan programs examined here typically offer at least two of these four attributes, with a few programs boasting all four. Results

  • The Oregon Energy Loan Program is one of a few state loan programs able to finance the installation of large-scale renewable energy systems, and is unique in that it does so by issuing either taxable or tax-exempt (even for private projects) bonds.
  • Although the program maintains the flexibility to tailor specific bond issuances to a project's needs, the double dipping provisions of the federal production tax credit (PTC) may still limit the value of the program for large-scale wind and closed-loop biomass projects. Several features of Oregon's program also limit its use for smaller loan sizes.
  • As currently configured, Oregon's program likely provides the most value to larger renewable facilities that cannot benefit from the PTC (clarity on whether the loan program would offset the PTC would be useful).
  • Experience reported from other states suggests that even well designed loan programs may generate little interest if a more fundamental requirement for success – the perceived value proposition of the technology being financed – is weak. In other words, loan programs are found to play a useful role in making projects that are inherently economic or near economic more affordable to a wider range of customers. Experience shows that higher-cost renewable technologies, such as PV, may not avail themselves to otherwise-attractive loan programs unless the loan program is combined with other favorable incentives such as an aggressive buy-down program (see German experience in separate case study on support for PV in Japan and Germany).

Journal

Case Studies of State Support for Renewable Energy

Year of Publication

2002

Organization

Research Areas

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