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June 15, 2010, WASHINGTON DC — — U.S. Senators proposed extending the 30% federal cash grants to renewable energy developers for another two years. Passed as part of the “2009 Recovery and Reinvestment Act”, Section 1603 gives 30% cash grants in lieu of investment tax credit (ITC) to renewable energy developers. Set to expire at the end of this year, the proposal would extend the Treasury-Department-issued grants until 2012. Though other Recovery Act programs have helped provide liquidity to the renewable energy, extending these cash grants is seen as vital to ensuring new solar, wind, and geothermal projects continue being installed across the United States.
Prior to the “2009 Recovery and Reinvestment Act”, a 30% tax credit was given to renewable energy developers to incentivize projects. Developers then sought tax-equity partners in order to provide initial project funding. While large Wall Street banks were able to provide tax-equity services before the financial crisis; after credit markets dried up, cash grants were needed to spur continued growth in renewables. By giving developers direct access to capital, the grants provide crucial start up funding for renewable energy projects, which can run into the millions of dollars.
The proposal comes in the form of an amendment to the “tax extender” portion of a $140 billion dollar federal unemployment and tax break extension package currently being deliberated in Congress. Six democratic senators, including Dianne Feinstein of California and Maria Cantwell of Washington, introduced the legislation last Tuesday. According to Feinstein, “The clean energy sector is the next frontier in jobs creation, so we need to ensure that developers can access financing to launch wind, solar and geothermal projects and put people to work.”
The current grant program is credited with helping keep U.S. wind, solar, and geothermal markets afloat after the financial crisis evaporated many sources of funding for renewable energy developers. Now, industry insiders and analysts agree that the proposed extension is crucial to avoid a possible slowdown. The senators did not specify the exact cost of the latest bipartisan proposal but said it would be minimal and will help to “jumpstart” a transition to clean energy.
It’s likely that as the grant-expiration deadline nears the federal government will act swiftly on the measure to prevent renewable energy sector from suffering a slowdown. The reliable funding provided from these incentives is vital to continued expansion and adoption of renewable energy in the United States. If this measure is passed, growth in renewables should continue to accelerate and increase as well as spur job creation in this important sector.
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