In part, the 2009 stimulus bill was formulated by our legislative branch to get the deposit multiplier going through the grant funding of “shovel ready” infrastructure, healthcare and clean energy and efficiency projects. Since it is the current economic situation that needs to be jumpstarted, our politicians insisted that immediate economic effect was necessary. To this end, $43 billion dollars of grant money was allocated to clean energy and energy efficiency projects that were ready to start construction immediately.
Here is the rub. The lifecycle of large clean energy project is long (2-3 years for a decent size wind project). There are few clean energy developers that sit around with “shovel ready” projects waiting for the stimulus grant fairy to come and put a slug of grant money under their pillow. The time value of money prevents this tactic. By the time a project has become “shovel ready” the developer has already invested significant time, resources, and capital into getting it to that point. For example, it could take a year to negotiate and lock-up wind energy leases, and install meteorological towers to gather wind speed data on a site - next comes an arduous environmental assessment and permitting process. After that, a typical grid interconnection agreement can take 1.5-3 years to push through a PUC, and that is often needed BEFORE a power purchase agreement (PPA) can be negotiated with buyer! Finally, equipment procurement, wind turbine purchase agreements, and contractors must be lined up before you have a “bankable” project (i.e. before a tax equity investor will buy the project from you). A project is not “shovel ready” until it has all of these pieces in place. Morale of the story, this is not a fast process, and if there is no tax equity light at the end of the tunnel (i.e. September 2009 – through today) the process is often halted or delayed to preserve capital.
To be fair, there are the “lucky” distressed assets out there as a result of tax equity leaving the market in fall 2009. (Their wishes have come true, and projects that were ready to be scrapped as uneconomic are now looking very attractive). But for the most part, if a project was economic and “shovel-ready” without the grant money then it had already locked up its financing before being “shovel ready”.
The challenge for the Department of Energy and other governmental organization that are receiving these funds is to balance the pressure to get them out the door fast with the need to maximize the impact that they have. Not an easy task. Big projects that make the most sense take time.