Financing Green Buildings

Financing Green Buildings

The American Recovery and Reinvestment Act of 2009 (“ARRA”), enacted in February 2009, has changed the playing field for financing green buildings.  It contains unprecedented federal support for renewable energy, energy efficiency and “smart grid” technologies.  For example, instead of receiving a production or investment tax credit for eligible types of renewable energy property, a developer or owner may instead elect to receive a grant from the federal government as a reimbursement for a portion of the expense of that property.  Why is this significant?  Because many renewable energy developers are start-ups or entrepreneurial companies that don’t have income, they often are forced to rely on recruiting a “tax equity” investor who can use the tax credits.  However, given the economic downturn, some existing or potential tax equity partners have been losing money, tax credits less valuable to them.  Thus, if developers are now eligible for an outright grant, this makes them less reliant on investors and represents a fundamental shift regarding how renewable energy projects will likely be structured.
 

See Green Financing: Governmental and Private Programs Concerning Financing of Green Buildings, Ch. 2M,

 written by J. Cullen Howe, in Real Estate Financing (Lexis treatise) for a detailed discussion of the effect of the ARRA on the financing of green buildings.