It’s official: A beloved federal grant program for renewable energy generation projects gets to live for another year. President Obama signed a tax package on Friday that extended a grant program, which provides 30 percent of the cost of a clean power project.
The signing capped a flurry of lobbying efforts by renewable energy trade groups to keep the program going beyond its original sunset date of Dec. 31, 2010. The program was born out of the American Recovery and Reinvestment Act of 2009 and was meant to help sustain an emerging industry sector that still relies heavily on government subsidies for growth.
The program gives the cash equivalent of a 30 percent investment tax credit good from 2009-2016. But it isn’t so useful for many renewable energy project developers during this economic downturn, especially if they want use it to attract banks or other investors who finance projects in exchange for the chance to use the tax credit. A tax credit is valuable to a company only if the company makes enough money to owe enough taxes to get the full reduction on its tax bill.
Trade groups such as the Solar Energy Industries Association wanted a 2-year extension, arguing that the economy will need that much longer to fully recover. SEIA issued a statement last week noting that the program had helped 1,179 solar projects that has collectively attracted over $1.3 billion in investment across 42 states. SEIA’s CEO Rhone Resch also warned that the solar industry could see many job losses if the program didn’t continue.
Early on, the program largely benefited wind project developers, such as energy giant Iberdrola.
Naturally, the signing of the tax bill Friday has generated many high-fives among solar energy advocates.
“It took a year of tireless effort from the entire solar industry and our champions in Congress to get an extension of the 1603 program,” Resch said in a statement Friday. “President Obama and our bipartisan champions in the Senate and House recognize that the solar industry is one of the fastest growing industries in our country, and this extension will create tens of thousands of new jobs for Americans.”
As a result of the extension, Borrego Solar is looking at increasing its full-time employees by 30 percent in 2011, said Mike Hall, CEO of the solar system installer.
The prospect that the program would not be extended prompted many project developers to rush to meet program rules that essentially gave them a grace period to complete their projects and still be eligible to receive the grant. Projects would’ve been eligible if construction had begun by the end of 2010, or if the developers proved they had spent or incurred 5 percent of the projects’ costs before the year’s end.
In the last few months, the California Energy Commission made it known that it was acting quickly to approve a series of large-scale solar power projects in order to allow the developers to start construction or meet the 5 percent rule. The commission held up its end of the bargain and approved all nine projects, totaling more than 4.1 GW. The commission approved the ninth project earlier this week.
While the extension is good news, it also could again cause a big rush by developers to meet eligibility rules before it sunsets at the end of 2011, said David Kaltsas, president of the systems group at SunWize Technologies, which designs and installs solar electric systems.
“We will have to be careful to not create a situation where the market overheats in 2011 at the expense of 2012 and 2013,” Kaltsas said. “That can create an imbalance of supply and demand of raw materials and force companies to make short-term decisions that aren’t good for the long run.”
Related content on GigaOM Pro (subscription required): Why Google Android’s Electric Vehicle Deal With GM Matters Why Microsoft’s Electric Vehicle Deal With Ford Matters Car Data As the Next Platform for Innovation
Photo courtesy of Anders Adermark