WASHINGTON The U.S. Senate on Tuesday approved a package to extend $18 billion in tax credits for using renewable energy sources like wind, solar and geothermal and also provide incentives to cut energy consumption.
The move, which alternative energy companies had been lobbying for all year, sent shares of solar power companies higher in after-hours trade. The delay in extending the tax credits had been a major damper on those stocks this year. The Senate was seen as the biggest roadblock after it shot down the extension eight times this year.
"Getting past what has been largely the deal-breaker in the past should be positive," Wedbush Morgan analyst Al Kaschalk said of the impact the vote would have on solar stocks.
Under the proposal, which will be part of a much bigger tax bill, the tax credit for producing electricity from wind would be extended for one year. The credit for other renewable sources, such as wave and ocean tide projects that generate power, would be extended for two years.
The residential and business tax breaks for solar energy would be extended for eight years.
"Solar is the winner here," Raymond James alternative energy analyst Pavel Molchanov said.
Shares of top U.S. solar company SunPower rose 4 percent in extended trade to $91, while First Solar Inc's stock rose 3.6 percent to $218.50. Evergreen Solar Inc shares gained 7 percent to $6.14.
Makers of wind turbines, solar panels and other sources of renewable energy argue that the tax credits are critical to making cleaner power competitive with that produced from greenhouse gas producing coal and fossil fuels.
The industry also says the tax credits will help green companies build manufacturing plants and other facilities that will create jobs.
"With major instability in our financial markets, solar energy is a guaranteed way to provide the stability we need in our economy right now," Rhone Resch, president of the Solar Energy Industries Association, said in a statement.
The House of Representatives must still vote on continuing the renewable energy tax credits, and the White House said earlier on Tuesday it would support the measure.
"Despite concerns with some provisions in this bill, it's a bill the president can sign, and we strongly encourage the House to pass it," White House spokesman Tony Fratto said.
Senate Majority Leader Harry Reid urged the House to "wise up and accept" the package as passed by the Senate.
"If they try to mess with our package, it will come back here, it will die," Reid said.
To cover the costs of the tax breaks, the oil industry would pay higher taxes.
The package is part of a bigger bill that has other tax credits for businesses and includes a one-year fix to the Alternative Minimum Tax so millions of Americans won't be subject to higher income taxes.
Businesses would get a 30 percent tax credit for eight more years for investing in solar, wind, geothermal and ocean energy equipment.
Homeowners also would get a 30 percent tax credit for eight additional years for the cost of installing solar equipment.
Homeowners could claim a tax credit of up to 10 percent of the cost of all qualified energy efficiency improvements, such as insulation, replacement windows, water heaters and heating and cooling equipment.
To reduce demand for petroleum, the bill creates a tax credit for plug-in electric cars, whose buyers will get a tax break of from $2,500 to $7,500, depending on battery capacity of the vehicle.
While environmentalists welcome the energy savings provisions and renewable tax breaks in the package, they oppose language that would allow oil companies to quickly write off the cost of expanding their refineries for processing oil from shale and tar sands.
Green groups said extracting oil from shale and tar sands in the West would use vast amounts of rare water supplies and pollute the land.
Oil shale production requires five gallons of water to produce one gallon of oil, they said. The government estimates the oil shale industry would use 200 million gallons of water a day.
Separately, House Democratic leaders may try to add their proposal to expand offshore drilling to must-pass legislation that would temporarily fund the government past the current budget year that ends on September 30.
The drilling bill, cleared by the House of Representatives last week, would permit energy exploration beyond 50 miles from the shoreline of the East and West coasts. (Additional reporting by Nichola Groom in Los Angeles and Steve James in New York; Editing by Gene Ramos and Carol Bishopric)