2024-02711. Request for Information Regarding the Manufacturing Capital Connector

AGENCY:

Office of Manufacturing and Energy Supply Chains, Department of Energy.

ACTION:

Request for information (RFI).

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 [e-mail] in accordance with the Response Guidelines in section VI of this document.

FOR FURTHER INFORMATION CONTACT:

Questions may be addressed to Rachel Gould, [e-mail] 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, 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.^[2 3] 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.

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 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

4. Clear indication of the specific question(s) to which you are responding.

Responses to this RFI must be submitted electronically to [e-mail]. 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.

Footnotes

1.  American Recovery and Reinvestment Act of 2009, Public Law 111–5 (February 17, 2009), https://www.congress.gov/​bill/​111th-congress/​house-bill/​1/​text.

2.  Inflation Reduction Act of 2022, Public Law 117–169 (August 16, 2022), https://www.congress.gov/​bill/​117th-congress/​house-bill/​5376/​text.

3.   https://www.energy.gov/​infrastructure/​qualifying-advanced-energy-project-credit-48c-program.

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: https://arcgis.netl.doe.gov/​portal/​apps/​experiencebuilder/​experience/​?id=​a44704679a4f44a5aac122324eb00914&​page=​home.