Tax credit expiry endangers wind, solar expansion

By Chris Baltimore

WASHINGTON (Reuters) - Growth of a nascent U.S. industry to build and install clean energy sources, like windmills and solar cells, could be stunted if Congress doesn't extend tax incentives set to expire next year, industry officials and lawmakers said on Wednesday.

Democrats last week dropped a $21.5 billion package of tax incentives from a broad energy bill after Republicans and the White House threatened to block it.

Without the tax credits set to expire at the end of 2008, homeowners and businesses will hesitate to invest in the new technologies, industry officials warn. Manufacturing plants for solar and wind power components will also be endangered, they said.

The credits are "absolutely critical for making a market in the United States," said Rhone Resch, president of the Solar Energy Industries Association. "What will happen is you will see solar installations start to drop off in the second quarter of 2008 if they are not extended."

Congressional action in the early part of 2008 is needed "to keep investors from getting nervous," said Greg Wetstone, governmental affairs director for the American Wind Energy Association.

"It would be hard to imagine a worse time for the United States to effectively shift away from the one policy that's now in place that reinforces renewable energy," Wetstone said.

Renewable sources are only a tiny slice of current U.S. power generation but could grow quickly in coming years as costs fall and global warming concerns encourage their use.

Leaders in both the Senate and House of Representatives vow to revisit the tax incentives next year, but so far have advanced no definite plans.