U.S. renewable energy tax grants extended for 1 year

An array of solar panels point to the Nevada sky as they generate electricity for use on Nellis Air Force Base in Las Vegas, Nevada May 27, 2009.

LOS ANGELES (Reuters) - The renewable energy industry cheered the passage of the U.S. tax bill, which included a provision to extend a generous grant program for projects in the fast-growing sector.

The grant program allows qualifying renewable energy projects such as solar and geothermal power plants to apply for a Treasury Department grant that covers up to 30 percent of costs. Until President Barack Obama signed the bill into law on Friday, the program was slated to expire on December 31, 2010.

"Orders will be on the rise for new wind power, and investors will put more capital into the U.S. economy because of what happened in Congress," said Denise Bode, chief executive of the American Wind Energy Association.

The solar and geothermal industries also praised the provision's passage, saying it would help them drum up business and create new jobs.

The Solar Energy Industry Association said the grant program has already helped install about 1,000 megawatts of solar-electric capacity this year, sustaining thousands of jobs in construction and installation and supplying enough power for about 200,000 homes.

"For Borrego Solar this extension will likely result in us increasing our full-time staff by 30 percent in 2011," Borrego CEO Mike Hall said. "In addition, we will be putting a lot more people to work indirectly through our vendor and subcontractor relationships."

Borrego is based in San Diego and has 77 employees.

Many solar developers were racing to meet the December 31 deadline for the grant, only to find they couldn't start construction by the December 31 deadline, typically due to difficulties or delays lining up financing.

The situation affects many of the high-profile utility-scale solar plants that were on a fast track for regulatory approval. While local and federal regulators met the December 31 deadline, many companies have not broken ground on their projects.

Developers with permitted projects that still need financing include NTR's Tessera Solar and Solar Millennium LLC.

Other companies planning to start building plants next year regardless of the program's existence will now likely be eligible for an extra financial boost from the grant. These include First Solar and SunPower.

The program was created last year under the American Recovery and Reinvestment Act. Under an already existing program, developers of renewable-energy initiatives could apply for investment tax credits that cover up to 30 percent of a project's costs.

The Recovery Act tweaked that program so that applicants could apply for cash grants instead of tax credits. To qualify for a grant, projects must start construction by December 31 2011, compared with December 31 2010 before the extension passed in the tax bill.

(Reporting by Sarah McBride; Editing by Richard Chang)