Notice2024-02711
Request for Information Regarding the Manufacturing Capital Connector
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
February 9, 2024
Issuing agencies
Energy Department
Abstract
The Department of Energy (DOE or the Department)'s Office of Manufacturing and Energy Supply Chains is issuing this RFI to notify parties of its potential interest in initiating a Manufacturing Capital Connector (MCC) to support applicants seeking clean energy manufacturing funding opportunities and/or tax credits. The Department also seeks input from all stakeholders through this RFI to help gauge the interest in and to inform the overall design of the MCC.
Full Text
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<title>Federal Register, Volume 89 Issue 28 (Friday, February 9, 2024)</title>
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[Federal Register Volume 89, Number 28 (Friday, February 9, 2024)]
[Notices]
[Pages 9132-9135]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-02711]
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DEPARTMENT OF ENERGY
Request for Information Regarding the Manufacturing Capital
Connector
AGENCY: Office of Manufacturing and Energy Supply Chains, Department of
Energy.
ACTION: Request for information (RFI).
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SUMMARY: The Department of Energy (DOE or the Department)'s Office of
Manufacturing and Energy Supply Chains is issuing this RFI to notify
parties of its potential interest in initiating a Manufacturing Capital
Connector (MCC) to support applicants seeking clean energy
manufacturing funding opportunities and/or tax credits. The Department
also seeks input from all stakeholders through this RFI to help gauge
the interest in and to inform the overall design of the MCC.
DATES: Written comments and information are requested by March 4, 2024.
ADDRESSES: Interested parties may submit comments electronically to
<a href="/cdn-cgi/l/email-protection#87c4e6f7eef3e6ebc4e8e9e9e2e4f3e8f5aad5c1cec7eff6a9e3e8e2a9e0e8f1"><span class="__cf_email__" data-cfemail="e0a381908994818ca38f8e8e8583948f92cdb2a6a9a08891ce848f85ce878f96">[email protected]</span></a> in accordance with the Response
Guidelines in section VI of this document.
FOR FURTHER INFORMATION CONTACT: Questions may be addressed to Rachel
Gould, <a href="/cdn-cgi/l/email-protection#93d0f2e3fae7f2ffd0fcfdfdf6f0e7fce1bec1d5dad3fbe2bdf7fcf6bdf4fce5"><span class="__cf_email__" data-cfemail="400321302934212c032f2e2e2523342f326d1206090028316e242f256e272f36">[email protected]</span></a> or (202) 586-6116.
SUPPLEMENTARY INFORMATION:
I. Background
The Department of Energy (DOE)'s Office of Manufacturing and Energy
Supply Chains (MESC) is considering establishing a Manufacturing
Capital Connector (MCC). The goal of the MCC is to facilitate the
commitment of private sector capital necessary to bring important clean
energy manufacturing projects to commercial operation. Specifically,
the MCC will:
(1) Educate capital providers about DOE's supply chain priority
areas and DOE-administered clean energy manufacturing opportunities,
such as the Qualifying Advanced Energy Project Credit (48C);
(2) Develop a list of capital providers interested in financing
clean energy manufacturing projects and the Best Practices they offer
(Best Practices are defined as a private capital provider's proposed
minimum level of consistent terms across applications regarding
response time, pricing, minimum amount of capital, diligence requests
(i.e., all topics covered under Question 14 in the For Potential
Capital Providers questions)) and share the list of interested capital
providers and their Best Practices on a publicly accessible DOE
website; and
(3) If an applicant decides to do so, the applicant may directly
share their application information with those capital providers that
offer Best Practices they find appealing. DOE is prohibited from
providing capital providers with any information about the applicant
nor confirmation of whether an organization has applied. Thus,
information exchange would be independent of DOE and voluntary.
The notional MCC could be particularly beneficial to applicants for
programs like 48C. The 48C program is an investment tax credit (ITC),
and as such the IRS will make final allocation decisions, with
companies receiving the tax credit only after the project is placed in
service and the credit is earned. Therefore, unlike many DOE-
administered grant and loan programs,
[[Page 9133]]
the applicant must commit all capital upfront for development and
construction, with costs offset by the tax credit only after the fact.
Given the scale of the 48C program, the Department's broader
manufacturing investments, and focus on historical energy communities
and disadvantaged communities, the Department of Energy seeks to find
ways to facilitate, expedite and streamline the initial non-federal
funding required. In summary, the intent of this RFI is to explore a
potential pathway to connect private capital to clean energy
manufacturing projects as outlined in the three goals above and
increase the likelihood that these projects reach completion and reap
the financial benefits, including tax credits or grant funding.
II. A Case Study--48C
A. Background
The 48C program was established by the American Recovery and
Reinvestment Act of 2009 \1\ and expanded with a $10 billion investment
under the Inflation Reduction Act of 2022.<SUP>2 3</SUP> The Department
of the Treasury and the IRS, in partnership with DOE, have announced
that approximately $4 billion will be allocated in Round 1, full
applications for which were due on December 26, 2023, with the
remaining to be announced in at least one more round of applications.
The expanded program provides an ITC for up to 30% of the qualified
investment for certified projects that meet prevailing wage and
apprenticeship requirements. At least forty percent of tax credit
allocations must go toward projects in energy communities \4\ and, as
one of its program policy factors, MESC seeks to support manufacturers
of all sizes including small- and medium-sized manufacturers. Although
using an MCC participating capital provider would not provide an
applicant any preference or advantage over a non-MCC participating
capital source, the creation of the MCC facilitates companies in
obtaining the 48C tax credit, which may be particularly helpful as
those in energy communities and/or small- and medium-sized
manufacturers have, historically, had less access to broader financing
sources.
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\1\ American Recovery and Reinvestment Act of 2009, Public Law
111-5 (February 17, 2009), <a href="https://www.congress.gov/bill/111th-congress/house-bill/1/text">https://www.congress.gov/bill/111th-congress/house-bill/1/text</a>.
\2\ Inflation Reduction Act of 2022, Public Law 117-169 (August
16, 2022), <a href="https://www.congress.gov/bill/117th-congress/house-bill/5376/text">https://www.congress.gov/bill/117th-congress/house-bill/5376/text</a>.
\3\ <a href="https://www.energy.gov/infrastructure/qualifying-advanced-energy-project-credit-48c-program">https://www.energy.gov/infrastructure/qualifying-advanced-energy-project-credit-48c-program</a>.
\4\ Project located in a census tract that satisfies the
relevant requirements of an energy community and has not received
funding in a prior round of 48C: <a href="https://arcgis.netl.doe.gov/portal/apps/experiencebuilder/experience/?id=a44704679a4f44a5aac122324eb00914&page=home">https://arcgis.netl.doe.gov/portal/apps/experiencebuilder/experience/?id=a44704679a4f44a5aac122324eb00914&page=home</a>.
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The 48C program targets three topic areas:
(1) Clean energy manufacturing and recycling, including renewable
energy; electric grid modernization; carbon capture, utilization, or
storage; chemical/fuel refining, blending or electrolyzing equipment;
energy efficiency; and electric or fuel cell vehicles and associated
recharging/refueling infrastructure;
(2) Industrial Greenhouse Gas (GHG) Emissions Reductions (e.g., GHG
reductions of an existing facility such as steel, cement, chemicals
etc.); and,
(3) Critical material refining, processing, and recycling.
The 48C program competitively selects the most qualified projects
from the applicant pool for receipt of the tax credit allocation based
on commercial viability, greenhouse gas emissions impacts, workforce
and community engagement, and ability to strengthen U.S. supply chains
and domestic manufacturing for a net-zero economy.
B. 48C Concept Papers
In August 2023, DOE received concept papers, i.e., high-level
application information, from applicants seeking the Round 1 tax credit
allocation. DOE provided encourage or discourage letters to applicants
who submitted concept papers on November 3, 2023. The submission
deadline for full applications was December 26, 2023.
In Round 1, concept papers requesting $42 billion in tax credit
allocations were received, of which nearly $11 billion were for
projects proposed in 48C energy communities. Together, Round 1 concept
papers represented over $142 billion of total investment in potential
projects.
III. Manufacturing Capital Connector--General Characteristics
The proposed MCC, as presently conceived, would encourage capital
providers to leverage the time-intensive, competitive, and thorough
application processes for Federal programs by providing applicants the
option to share their application information with participating
private sector financing counterparties. Applicants could choose to
share their application materials with potential private sector capital
providers without DOE serving as an intermediary. DOE cannot directly
provide capital providers any information about whether an organization
is or is not a 48C program applicant. Applicants would be able to share
their materials with the capital providers that offer Best Practices
preferred by the applicant that enhance their project's potential for
success. Applicants could also choose to share their application
materials with capital providers not participating in the MCC. Private
capital providers would be able to select the clean energy projects
they would like to finance at their discretion and following any
additional due diligence steps required by the private capital
provider, without DOE involvement.
DOE seeks feedback on the proposal for the structure of the MCC as
well as expressions of interest from private sector capital providers
potentially interested in joining the MCC. If the proposed MCC moves
forward, DOE aims to compile a list of capital providers in March 2024
and outline Best Practices during the second quarter of 2024.
IV. Potential Benefits
For the company applicants participating in MCC, the MCC would
strive to (1) improve the timing and magnitude of available capital,
(2) reduce the redundancy of work due to the overlap of document
requirements between their application and private sector commercial
due diligence processes (e.g., financial model, market report), (3)
lower the cost of capital, and (4) enable potentially less financially
sophisticated and smaller manufacturers better and more affordable
access to larger pools of capital with lower transaction costs. Note
that federal program applicants that choose to use an MCC participating
capital provider would not receive any preference in the application
process for doing so over other sources of financing.
For the private sector financing partners, the MCC would (1)
facilitate access to an origination stream of mature-technology clean
energy projects with a combined enterprise value in the tens of
billions, (2) enable a faster due diligence process because of the
extensive relevant documentation already generated for an application
to Federal programs, and (3) help federal program applicants with de-
risked projects that have received or are being evaluated to receive a
Federal financial benefit and that align with priority investment areas
to connect with potential private sector financing partners.
In making recommendations to the IRS about which 48C projects
should receive allocations and in making selections for clean energy
[[Page 9134]]
manufacturing awards under DOE grants, DOE aims to select the most
impactful projects that align with DOE priority areas, considering
commercial viability and a full ecosystem that promotes their success.
To further this aim, the MCC as described previously could increase the
number of selected projects that obtain the financing needed to reach
completion and secure the ITC as well as potentially provide a lower
cost of capital and ease the financing process for some organizations.
V. Questions for Request for Information
To help inform the interest in and design of the MCC for clean
energy manufacturing programs, DOE is seeking public input on the
potential structure, benefits, and risks of the proposed MCC from
potential capital providers and clean energy manufacturing program
applicants or selectees. DOE specifically welcomes comment on the
following questions:
For Applicants or Selectees
1. What impediments do you see in DOE providing applicants and the
public with information about private sector capital providers
interested in financing clean energy projects?
2. Would you be more likely to apply for a grant, tax credit
allocation, or other Federal funding, if you knew that a list of
private sector financial institutions interested in financing clean
energy manufacturing projects would be available on a publicly
accessible DOE website?
3. What information would be most helpful to have from interested
private sector capital providers?
4. Does the establishment of the MCC potentially increase the speed
at which you can develop your project?
5. Do you anticipate your organization would review the list of
interested private sector capital providers and/or would your company
be likely to share your application materials? Are there any materials
typical to a Federal application that an applicant would not be willing
to share with private sector capital providers?
6. Do you foresee risks to the involved stakeholders in leveraging
already provided application materials with applicants directly sharing
information with private sector financing? What are those risks and how
could they be mitigated in the creation and operation of the MCC?
7. What Best Practices should private sector capital providers
offer in order to participate in the MCC?
8. What types of capital and support from private sector financial
institutions does your project need to proceed forward to commercial
operations? For example, if your project is seeking the 48C tax credit
allocation, would your company need support in monetizing the tax
credits?
For Potential Capital Providers
9. Would your institution have interest in participating in the MCC
as described in (or similar to) this RFI and have information about
your interest available on a publicly accessible DOE website?
10. What is the most effective way DOE could catalyze private
sector investment into clean energy projects? Are there alternatives to
the MCC that DOE can provide to achieve the same goals? Are there other
tenets to the MCC that DOE should try to include?
11. What is the most effective way DOE could educate private
capital providers on Federal clean energy programs in order to
facilitate private sector investment?
12. Financial institutions interested in financing clean energy
projects such as those that apply to 48C need to evaluate projects in a
timely manner and commit to deploy capital. What are some Best
Practices your institution would be willing to offer in evaluating
clean energy manufacturing projects? For instance, would private sector
capital providers commit to finance a certain amount ($) or number of
projects, respond with a term sheet in a certain number of days, and/or
commit to a percentage of viewed opportunities, within a range of
parameters (e.g., interest rate, tenor)?
13. Application overview and information sharing (for reference,
DOE funding opportunity announcements often require a detailed
application narrative, workforce and community benefits plan, data
sheet, and appendices that include a financial model, financial
statements, and offtake/sales agreements):
a. What information and documentation are most pertinent for a
financing institution's decision? Is there further information that
your institution may need to make an investment decision?
b. What are industry best practices for protecting applicants'
privacy? How can private sector financial institutions seeking to
participate in the MCC demonstrate that they have appropriate
safeguards in place to prevent the release of confidential business?
14. Questions regarding Capital Provider's Best Practices:
a. Based on the three topic areas noted in the 48C Case Study, is
your institution interested in all/most of the three topic areas? If
not, please specify topics areas that are not of interest.
b. What part of the capital structure would your institution be
interested in participating in (e.g., senior secured, mezzanine,
preferred equity, common equity, tax equity (original investment or
subsequent transferability), other)? Please outline all structures of
interest.
c. What is your typical minimum and maximum investment amount,
advance rate, and tenor on an investment in these topic areas?
d. Is there a minimum or maximum number of projects your
institution would be interested in financing?
e. How much capital would your financial institution be potentially
willing to make available to projects via the MCC?
f. Does your institution require a type of revenue/offtake
contract? If so, what kind, what tenor, and for what percentage of the
output? Please provide as much detail as possible.
g. What balance sheet metrics (e.g., liquidity, debt-to-equity)
does your institution look for in the project and in the Sponsor of a
project?
h. What terms (e.g., interest rate, DSCR, tenor, maturity) would
your institution potentially be willing to provide as one of the
private sector capital providers?
15. What would enable a capital provider to view eligible clean
energy manufacturing projects, such as 48C projects, as a portfolio
versus one-off projects? Would viewing as a portfolio lower the cost of
capital from your institution?
16. What would be the potential sources of your capital? Would your
financial institution be using existing funds, or would they raise
outside capital?
17. Do you foresee risks to the involved stakeholders in using the
MCC to find potential manufacturing projects to finance?
VI. Response Guidelines
Commenters are welcome to comment on any question regardless of
status as a potential applicant or private capital provider. Commenters
do not need to identify whether they are a previous, current, or
potential applicant or private capital provider. RFI responses shall
include:
1. RFI title;
2. Name(s), phone number(s), and email address(es) for the
principal point(s) of contact;
3. Institution or organization affiliation and postal address; and
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4. Clear indication of the specific question(s) to which you are
responding.
Responses to this RFI must be submitted electronically to
<a href="/cdn-cgi/l/email-protection#da99bbaab3aebbb699b5b4b4bfb9aeb5a8f7889c939ab2abf4beb5bff4bdb5ac"><span class="__cf_email__" data-cfemail="460527362f32272a0529282823253229346b14000f062e376822292368212930">[email protected]</span></a>. with the subject line ``Manufacturing
Capital Connector'' no later than 5:00 p.m. (ET) on March 4, 2024.
Responses must be provided as attachments to an email. It is
recommended that attachments with file sizes exceeding 25 MB be
compressed (i.e., zipped) to ensure message delivery. Responses must be
provided as a Microsoft Word (*.docx) or Adobe Acrobat (*.pdf)
attachment to the email, and no more than 10 pages in length, 12-point
font, 1-inch margins. Only electronic responses will be accepted.
Responses including confidential business information will be
handled per guidance in section VII of this document.
A response to this RFI will not be viewed as a binding commitment
to develop or pursue the project or ideas discussed. MESC may engage in
pre- and post-response conversations with interested parties.
VII. Confidential Business Information
Because information received in response to this RFI may be used to
structure future programs and/or otherwise be made available to the
public, respondents are strongly advised NOT to include any information
in their responses that might be considered business sensitive,
proprietary, or otherwise confidential.
Pursuant to 10 CFR 1004.11, any person submitting information that
he or she believes to be confidential and exempt by law from public
disclosure should submit via email two well-marked copies: One copy of
the document marked ``confidential'' including all the information
believed to be confidential, and one copy of the document marked ``non-
confidential'' with the information believed to be confidential
deleted. Failure to comply with these marking requirements may result
in the disclosure of the unmarked information under the Freedom of
Information Act or otherwise. The U.S. Government is not liable for the
disclosure or use of unmarked information and may use or disclose such
information for any purpose.
If your response contains confidential, proprietary, or privileged
information, you must include a cover sheet marked as follows
identifying the specific pages containing confidential, proprietary, or
privileged information:
Notice of Restriction on Disclosure and Use of Data:
Pages [list applicable pages] of this response may contain
confidential, proprietary, or privileged information that is exempt
from public disclosure. Such information shall be used or disclosed
only for the purposes described in this RFI. The Government may use or
disclose any information that is not appropriately marked or otherwise
restricted, regardless of source.
In addition, (1) the header and footer of every page that contains
confidential, proprietary, or privileged information must be marked as
follows: ``Contains Confidential, Proprietary, or Privileged
Information Exempt from Public Disclosure'' and (2) every line and
paragraph containing proprietary, privileged, or trade secret
information must be clearly marked with [[double brackets]] or
highlighting.
Signing Authority
This document of the Department of Energy was signed on February 6,
2024, by Giulia Siccardo, Director, Office of Manufacturing and Energy
Supply Chains, pursuant to delegated authority from the Secretary of
Energy. That document with the original signature and date is
maintained by DOE. For administrative purposes only, and in compliance
with requirements of the Office of the Federal Register, the
undersigned DOE Federal Register Liaison Officer has been authorized to
sign and submit the document in electronic format for publication, as
an official document of the Department of Energy. This administrative
process in no way alters the legal effect of this document upon
publication in the Federal Register.
Signed in Washington, DC, on February 6, 2024.
Treena V. Garrett,
Federal Register Liaison Officer, U.S. Department of Energy.
[FR Doc. 2024-02711 Filed 2-8-24; 8:45 am]
BILLING CODE 6450-01-P
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