Date: December 18, 2009
Source: News Room
Sens. Dianne Feinstein (D-CA) and Jeff Merkley (D-OR) introduced legislation that will allow qualified renewable energy projects to exchange tax credits for Treasury Department grants. The program would cover up to 30 percent of project costs for wind, solar, biomass and certain other types of projects until 2012. It is meant to remedy the effects of the recession which rendered traditional tax credits useless because lenders and investors had no profits in order to benefit from tax credits. Currently, there is no cap to the program. Treasury has estimated it will provide about $3 billion in grants to support $10 billion to $14 billion worth of projects under the program, which is slated to end next year.
"The grant program is set to expire at the end of next year, before most construction is expected to occur and well before experts expect the tax equity markets to thaw," Feinstein said in a statement. "If the grant program is not extended, bank profits will again become the limiting factor on renewable energy development in the United States, and that makes no sense," she said.
PRESS RELEASE:
Thursday, December 17, 2009
Senators Feinstein and Merkley Introduce Measure to Spur Renewable Energy Development
Measure would extend and expand Treasury Department grant program-
Washington, DC – U.S. Senators Dianne Feinstein (D-Calif.) and Jeff Merkley (D-Ore.) today introduced a measure to spur the development of renewable energy employment and construction, such as wind and solar farms and solar panel factories. The bill would primarily extend and expand a popular Treasury Department grant program that was established in Section 1603 of the American Recovery and Reinvestment Act of 2009 in order to help diminish the impact of the economic crisis on the renewable energy sector.
The Treasury grant program helps renewable energy developers secure affordable financing to move forward with capital-intensive projects. It is currently slated to expire in 2010. The legislation introduced today by Senators Feinstein and Merkley would extend the program for two additional years, until 2012. It would also expand this program to allow public power utilities to participate, since they are currently ineligible. Finally, it would create a new tax credit for solar manufacturing facilities and the construction of large solar projects on disturbed private lands.
"One of the consequences of the economic crisis was the shelving of major solar and wind projects, as readily-available financing evaporated," Senator Feinstein said. "The stimulus bill established a new grant program to help restart these projects by allowing renewable energy developers to qualify for grants, or payments, from the Treasury Department instead of claiming tax credits. But the grant program is set to expire at the end of next year, before most construction is expected to occur and well before experts expect the tax equity markets to thaw. If the grant program is not extended, bank profits will again become the limiting factor on renewable energy development in the United States, and that makes no sense. This legislation would extend the grant program for two additional years, until 2012. It would also allow public power utilities to qualify for the grants program, since they provide energy for as many as 45 million Americans."
Senator Merkley said, "This bill makes sure incentives for renewable energy keep functioning during this recession and keep acting as job-creation engines. It also extends this important job-generating program to utilities that serve many smaller Oregon towns and rural areas."
Background
Before this year, wind and solar developers were required to partner with large, profitable banks in complex financial agreements, where banks would provide their equity (or profits) to development projects in exchange for a 30 percent tax credit, and charge the developers a fee.
When the economic crisis struck, the tax equity market that financed renewable energy development was frozen and major projects were shelved and delayed.
Section 1603 of the American Recovery and Reinvestment Act (the Stimulus bill) established "payments in lieu of tax credits for specified energy property." The program allows renewable energy developers to qualify directly for a 30 percent federal grant for capital-intensive projects, equivalent to the amount they would have expected from tax credits.
Experts credit the grant program with helping to resume development of new major solar and wind projects.
Bill Summary
The Feinstein-Merkley bill, the Renewable Energy Incentive Act (S.2899), specifically would:
Extend the Treasury Grants Program until 2012: The program allows renewable energy developers to take grants, or payments, from the Treasury department instead of claiming tax credits in order to help build projects that require a great deal of capital upfront. The program is set to expire in 2010, but experts believe this deadline is well before most large-scale renewable energy projects would be ready to begin construction or tax equity markets would be primed to rebound. The Feinstein measure would extend the program until 2012.
Permits Public Power Utilities to receive Treasury Grants for Renewable Energy: The bill would level the playing field between public power and for-profit companies by allowing public power utilities to receive Treasury Grants for renewable energy projects. Public power serves 45 million American consumers, but these utilities are currently the only major segment of the power industry prohibited from receiving Treasury Grants for their renewable energy projects. Public power utilities have to establish complex financial arrangements with private developers, in order to build renewable energy projects that qualify for grants under current law. This is in conflict with public power's vertically integrated, non-profit model.
Expands the solar investment tax credit to include manufacturing equipment and solar water heaters for commercial and community pools. The bill would allow equipment that makes solar panels to qualify for the 30 percent solar investment tax credit. Promoting solar manufacturing in this country could lead to thousands of new jobs, such as those being created at Solyndra's new factory in Fremont, CA.
Commercial pools are common at hotels/motels, health clubs, and schools. Approximately 189,000 commercial pools nationwide use fossil fuel or electricity to heat an estimated 27.25 billion gallons of water. If the heating systems were replaced with solar water heating systems, there would be 1.23 million tons of carbon dioxide emissions avoided annually, which is equivalent to taking 237,000 cars off the road. California has 26 percent of all commercial pools in the U.S. and could significantly reduce pollution by widely adopting solar hot water heating.
Establishes a new solar tax credit for consolidation of disturbed private land with high solar value. The bill would create a 30 percent investment tax credit for the purchase, consolidation, and use of multiple, 100 acre or less blocks of high solarity, disturbed private lands for solar development. Solar developers have focused development proposals on pristine public land because it is very difficult, costly, and time intensive to consolidate large blocks of disturbed private land from many different owners.
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