Congress Tosses Lifeline to Solar: Tax Grant Program Extended
The solar industry is opening the bubbly a little early this year as the treasury grant program, which seemed all but dead a few weeks ago, will see another day---or actually another year. The rollercoaster ride that has characterized the debate over several months may have a safe landing after all. The Los Angeles Times reports:
Last week, when it seemed the program might expire at the end of the year, renewable-energy companies were panicking. A renewal attempt had been shot down in Congress earlier in the month and then left out of a tax deal engineered by President Obama.
The industry dropped everything and went into lobbying overdrive, making dire predictions that hundreds of thousands of jobs could be lost without the ready government funds and that several years of record-breaking growth could be reversed. Without the program, financing for the sector could plunge 56% in 2011, according to a letter signed last week by Congress members pushing for an extension.
Solar Industry Magazine also identifies another significant provision in the legislation. According to the article, the bill would allow 100% depreciation bonus on new equipment place in service after September 8, 2010, although the taxpayer would have to have the tax appetite to use the depreciation, unlike the cash grant, which is a grant not a credit. The article explains the depreciation bonus:
The 100% depreciation bonus is equivalent to an additional 5.2% investment tax credit on a wind farm or solar project - if a developer can use it. Many developers are expected to have a hard time converting the bonus into cash in the tax-equity market. Some developers are also concerned that the bonus could reduce overall tax capacity in the market.
The last minute haggling in the House yesterday left the result uncertain until the final vote was taken on the Senate version at almost midnight. The extension to the treasury grant program, we believe, is in the legislation that President Obama is expected to sign today. The extension is good news for the solar industry. This editorial from one of the sunniest places in the United States sums up the jubilation. According to the editorial in the Desert Sun of Palm Springs, "Renewable energy is still a fledgling business in many ways and needs the incentives to flourish. It means so much to the Coachella Valley's economic development, keeping the air clean and attractive to visitors, and in reducing dependence on foreign oil. Congress has provided tax breaks for oil and coal projects for years. It should do much more for renewable energy."