Treasury and Energy departments release long-awaited rules for grant money

When Congress was debating an extension of the renewable energy tax credits set to expire at the end of 2008, the loudest argument from the wind and solar industries was that letting the tax credits expire would have a deleterious affect on renewable energy development in the United States. And before the credits expired, Congress passed a short term extension of the renewable energy production and investment tax credits.

But then the credit markets froze. There was little to no money to borrow to get projects off the ground. At that point, the extension of the production tax credit was almost moot.

Recognizing this, the authors of The American Recovery and Reinvestment Act of 2009 addressed some of the problems created by the credit freeze by authorizing the Treasury Department to make immediate, direct payments to companies for projects—in lieu of tax credits—for an estimated 5,000 bio-mass, solar, wind and geothermal energy facilities.

And on Thursday, Energy Secretary Steven Chu and Treasury Secretary Tim Geithner together announced that they were ready to start doling out that cash, or at least how they would dole it out.

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Last week’s well-publicized economic bailout package, included several “sweeteners” to help it through the House. Extended were the tax credits for solar, wind, and geothermal as well as tax credits for green building and energy efficiency. But what also passed was a new federal-level investment tax credit for qualified small wind turbines. The ITC is valued at $500/.5kw capacity for up to $4,000 and available for small and micro-wind turbines (up to 100kw), including vertical-axis wind turbines, installed through 2016.

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Currently, the issue of climate change appears to be on the back burner as governments are focused on the financial problems that have shaken the global economy. It could be several months before politicians return to focusing their attention on long term problems like global warming.

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Government Guaranteed Revenues for Large Renewable Energy Players

Unlike other industries, renewable energy has government-guaranteed revenues. However it is likely that as the credit crunch plays out, the re-bounders will be big utilities who are not reliant on banks for short term loans rather than start-ups who do.

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>>More on renewable energy tax credits in Congress

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[Update: On Tuesday afternoon, the Senate passed H.R. 6049 by a tally of 93-2. Senator John McCain, along with Senators Obama and Biden, did not record a vote on the tax credits.]

The U.S. Senate is scheduled to vote as early as Tuesday, on the Baucus/Grassley Amendment to H.R. 6049, legislation that would extend tax breaks for renewable energy production and energy-efficiency measures.

Negotiators hammered out the extensive tax package to continue investment credits for solar, wind, and geothermal energy. It also creates a new tax credit for purchasers of plug-in hybrid vehicles.

>>More on Senate struggles with renewable energy at RG&B

The Senate version of the measure, would spend $17 billion on energy tax incentives over 10 years and pay for those incentives by limiting some oil and gas company deductions, altering tax treatment of certain foreign oil-related income and raising the per-barrel tax by four cents over three years.

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The issue of alternative fuels came up for McCain Thursday as well, during a forum at the Aspen Institute. In the past, McCain has said that he opposes tax breaks for wind and solar development because they interfere with the market. Asked about that Thursday, McCain said he has a long record of support for alternative fuels. Asked specifically if he was for renewing tax breaks for wind and solar that expire this year, he surprisingly said, “of course.”

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Renewable energy investment and production tax credits are set to expire at the end of this year and it is argued by many that passage of the credits is essential to fledgling (and still relatively expensive) solar, wind and geothermal industries.

Senate leaders had hoped that since they padded the bill with titles to extend tax breaks for teachers, businesses and parents, they would be able to muster the support of a couple more Republicans needed for its passage. But only four Senators crossed the aisle to vote with the Democrats: Susan Collins and Olympia Snow of Maine, Elizabeth Dole of North Carolina, and Gordon Smith of Oregon.

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What I do know, is that as early as tomorrow, the Senate will vote on S. 3335, which includes an 8 year extension of the commercial and residential solar tax credit, and doubles the residential cap to $4,000.

S. 3335 (pdf) was devised by Senate Democrats to include bi-partisan must-pass provisions, such as tax relief for families and businesses affected by natural disasters this year in the Midwest and West, and an exemption on the Alternative Minimum Tax (AMT) for middle- income families.

An eight year of the investment tax credit would give the solar industry the long term security it needs to ramp up production in the United States, which in turn, would create jobs, and limit the need for the construction of any new coal-fired power plants. If you want to see this bill pass, I urge you to take action on the investment tax credit by contacting your Senator immediately.

Other posts about federal renewable energy tax credits:

• “Senate Blocks Renewable Energy Tax Credits Bill… Again. SF to Go it Alone”
• “Senator Attacks Solar Energy Industry”
• “Senate to Vote on Renewables as Early as Today”
• “Senate Passes Renewable Energy Tax Credits. Shouldn’t I be More Excited?”

Photo: Clearly Ambiguous via flickr Under a Creative Commons License

The renewable energy tax credits were slipped into a housing bill that that did not end up looking the way its lead author, Sen. Chris Dodd really intended it to, remarking earlier in the week that it was “a housing bill, not a Christmas tree.”

However, will the production tax credit and investment tax credit ever make it to the President’s desk to sign?

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As was reported at Hill Heat, and elsewhere, Senators John Ensign (R-NV) and Maria Cantwell (D-WA), led a bipartisan group of senators in announcing a bill to incentivize the development of renewable energy and expand energy efficiency in buildings, homes, and appliances. The Clean Energy Tax Stimulus Package of 2008 (pdf) will provide some certainty to investors and those individuals and businesses that are considering adding solar, wind, biomass, methane capture, or other clean energy technologies.

Teetering on the brink of passage

Renewable Energy tax packages always face trouble in the Senate, and this dates back to our first energy crises in the 1970s. In a more recent example, a tax package failed repeatedly on the Senate floor, including a $22 billion version that fell one vote short of winning approval as an amendment to a broader energy bill in December. Many Republicans balked at the funding mechanism for the previous renewable energy incentives because they rescinded tax breaks from the big energy companies (which was spun by the right as a “tax increase.”).

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