"Avoiding the Haircut: Potential Ways to Enhance the Value of the USDA's
Section 9006 Program."

Lawrence Berkley National Laboratory recently published this important and timely report, written by Mark Bolinger, on the interaction b/t the PTC and the USDA Farm Bill in wind projects.
Abstract below and full report here: "Avoiding the Haircut: Potential Ways to Enhance the Value of the USDA's
http://eetd.lbl.gov/ea/ems/reports/61076.pdf.

Abstract:
Section 9006 of Title IX of the 2002 Farm Bill established the Renewable
Energy Systems and Energy Efficiency Improvements Program (the "Section
9006 program"). Administered by the United States Department of
Agriculture (USDA), the Section 9006 program provides grants, loan
guarantees, and -- perhaps in the future -- direct loans to farmers,
ranchers, and rural small businesses for assistance with purchasing
renewable energy systems and making energy efficiency improvements.

In the first three rounds of grant funding under this program, large
(defined as > 100 kW) wind projects have been awarded nearly $26
million, or roughly 40% of all grant dollars awarded to date. Such
projects are also typically eligible for the Federal Production Tax
Credit (PTC) codified in Section 45 of the US tax code. Because the PTC
provides a significant amount of value to a wind project, most "large
wind" applicants to the Section 9006 program have also tried to take
advantage of the PTC.

Through what are known as "anti-double-dipping" or, more colloquially,
"haircut" provisions, however, the size of the PTC is reduced if a
project receives certain other forms of governmental support. The
legislative and regulatory history surrounding the PTC's haircut
provisions suggests that grants and direct loans (but not loan
guarantees) provided under the Section 9006 program will cause a PTC
haircut.

Focusing exclusively on wind projects, this report explores the
anti-double-dipping issue and suggests some ways that the program could
possibly avoid a PTC haircut. Its purpose is two-fold: (1) to inform
recipients of Section 9006 grants, as well as applicants and potential
applicants to the program, of the implications of the PTC's
anti-double-dipping provisions; and (2) to help the USDA and related
stakeholders understand the negative financial impact of such
provisions, and possibly re-design the program to avoid that impact.