Biomass Feasibility Project Final Report - Xcel Energy

Suitable borrowers. For-profit SBCs with a history of success in the same industry for which the
funds are to be used. There are some company size and industry type exclusions.
Loan to collateral value or cost. Up to 90% of the cost for existing SBCs, 85% for start-ups. A
classic percentage approved by SBA is where the bank's conventional loan is 50%, the
debenture is 40% and the SBC provides 10% or more. An example financing of a $1,875,000
plant expansion might look like this:
• $750,000 -- SBA Subordinated debenture @ 6% fixed for 20 years.
• $937,500 -- Bank conventional loan @ 8%, 10 years adjustable every 3 years.
• $1,687,500 -- Total loan @ blended rate and term.
• $187,500 -- Minimum cash requirement from SBC
• $1,875,000 -- Total plant expansion
The 504 loan has numerous fees, requirements and restrictions. Begin by locating the CDC
covering your area to discuss the specific proposal. See www.sba.gov/financing/sbaloan/
cdc504.html for details
Energy-Specific Incentive Programs
As noted earlier, many energy incentives promote conservation and efficiency rather than
production. And some that do promote production focus on a broad variety of small
technologies of farm, household or small business scale, not utility scale. The following list of
programs concentrates on those particularly relevant to biomass plants or cogeneration
projects.
For a complete summary of federal and state energy programs, go to: http://www.dsireusa.org
The Federal Renewable Electricity Production Tax Credit (REPC)
Although cogeneration long has been, and probably will continue to be, the predominant
source of renewable biomass energy in the nation, it so far has gotten short shrift from
government programs, perhaps on the theory that cogeneration is its own reward. An example
noted elsewhere in this paper, the U.S. pulp and paper industry, has for more than a century
used waste wood to generate thousands of megawatts of electricity for internal use -- not
because of mandates or incentives, but because cogeneration saves money.
As a result of those intrinsic economic benefits, policy makers haven’t seen fit to create
incentives for co-generation comparable to those for dedicated biomass power. “Closed-loop”
biomass energy from dedicated energy crops rather than residues has received an annual
federal tax credit of 1.9 cents per kWh since 1992. But a credit for “open-loop” biomass (i.e.,
manufacturing residues, agricultural waste, landfill gas and municipal solid waste) didn’t appear
until 2004 in the American Jobs Creation Act (H.R. 4520). It gave a reduced credit of just 1 cent
to open-loop biomass -- but added the full 1.9 cent credit to refined coal.
For the IRS form on the credit, go to: (www.irs.gov/pub/irs-pdf/f8835.pdf.)
The REPC has been extended, expanded or modified through a series of seven federal statutes
beginning with the Energy Policy Act of 1992. For a full history, go to: http://www.dsireusa.org/
library/includes/incentive2.cfmIncentive_Code=US13F&State=federal&currentpageid=1&ee=0
&re=1
Identifying Effective Biomass Strategies: Page 115
Quantifying Minnesota’s Resources and Evaluating Future Opportunities