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CREBs (Clean Renewable Energy Bonds) are part of the Energy Policy Act of 2005 signed into law on August 8, 2005. It is a program designed to give not-for-profit, member-owned electric cooperatives and public power systems an incentive to develop clean, renewable energy sources by providing very low-cost capital. It is designed to provide a similar incentive to the production tax credit (PTC) program currently offered to private investors and IOUs.
Under the Energy Policy Act of 2005, a qualified issuer, such as CFC, can issue CREBs. The federal government provides a tax credit to the bond purchaser, which results in very low-cost capital being made available. The proceeds from these bonds are then available to finance new renewable energy projects. Electric cooperatives and public power entities can also issue CREBs.
Many electric cooperatives, located in rural areas, are ideally positioned to take advantage of renewable resources, such as wind and hydropower. However, renewable energy projects, when compared to conventional generation facilities, are much more expensive and not economically feasible for many electric cooperatives. By providing low-cost capital through CREBs, this program is designed to make renewable energy projects more affordable to the rural communities that the electric cooperatives and public power systems serve.
CFC is a not-for-profit, member-owned finance cooperative that provides an assured source of low cost capital and financial services to electric cooperatives. As a qualified issuer of CREBs, CFC helps its electric cooperative member-owners obtain proceeds from CREBs for an array of qualified renewable energy projects. This is one among many financial services that CFC provides to its members.
Actually, the same projects that qualify under the production tax credit program are eligible under this program. Here are just a few examples:
- Wind
- Closed-loop biomass
- Open-loop biomass
- Geothermal or solar energy
- Small irrigation power
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- Landfill gas
- Trash combustion
- Refined coal production
- Qualified hydropower
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Electric cooperatives play a significant role in renewable energy development and will continue to expand renewable generation capacity with the support of the CREBs program. Research by the National Rural Electric Cooperative Association (NRECA) indicates that 90 percent of the nation's 900-plus electric cooperatives offer green power of some form to their customers.
Electric cooperative power is 11 percent renewable today, compared to 9 percent for the industry as a whole. The majority of electric co-op renewable power is hydropower, which is purchased from federal and state hydro facilities. Most renewable power in the electric utility industry—including investor-owned utilities and municipal systems—is hydropower as well.
Cooperatives also own and operate nearly 100 projects of their own totaling 450 megawatts, despite not having a financing vehicle comparable to production tax credits until the recent enactment of CREBs. By 2010, electric cooperatives plan to increase by 50 percent their owned, non-hydro renewable capacity with wind, biomass, small hydro, solar and other renewable energy projects.
The Treasury Department authorized $1.2 billion in CREBs for two years, beginning January 1, 2006 through December 31, 2008. Of that, $450 million is reserved for electric cooperatives.
Response to the CREBs program among electric cooperatives has been positive. To date, electric cooperatives have submitted 85 applications to the Treasury Department for a total of $554 million in bond authority. Of those filed by CFC on behalf of its member-owners, the U.S. Internal Revenue Service has approved more than 65 applications for a total of more than $314 million in potential renewable projects.
In total, 78 electric cooperative projects in 22 states have received bond allocations to date. As of February 6, 2008, CFC has issued almost $31 million in CREBs for six electric cooperatives in five states to fund 27 renewable energy projects.
CFC members should contact CFC's Linda Graham at 800-424-2954, ext 6753, or linda.graham@nrucfc.coop.
Investors and media should contact CFC's Rhonda Smith at 800-424-2954, ext 6895, or rhonda.smith@nrucfc.coop.
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