Leaders of the U.S. solar industry will have one last shot at convincing the current Congress to extend a key federal solar incentive before a new Republican-controlled congress takes over at the beginning of 2011. Most indications are that the solar grant option — which has for the past two years provided cash grants worth 30 percent of commercial solar energy system costs — will sunset at the end of 2010, as scheduled.

It’s not over ’til the fat lady sings, however. During a lame-duck session of Congress, lawmakers will debate whether to extend the grant. If it’s not renewed, the grant will revert to a tax credit, also worth 30 percent of system costs. Because cash is more valuable than a tax credit — particularly in slow economic times — the solar grant has proved to be a real boon for renewable energy projects and green-jobs creation.

Supporters of the cash incentive say it helped install roughly 1,000 megawatts (MW) of solar-electric capacity in the U.S. this year, and helped generate enough clean energy to power 220,000 average American homes. According to the Solar Energy Industries Association (SEIA), the cash incentive has helped finance over 1,300 renewable energy projects in 41 states.

The incentive is extremely important to the growth of the clean energy industry in the U.S. Cash appeals to lenders and investors who are thinking about funding solar projects, and an extension, makes financings “easier and cheaper,” according to First Solar’s spokesman Alan Bernheimer. In 2010, the U.S. was able to install more than double the amount of  solar capacity installed during 2009 — and triple of what was installed in 2008 — thanks largely to the federal solar grant program. Without the cash incentive, project developers will have to look for investors who want to offset taxable income with tax credits — an approach called “tax equity” financing. In a weak economy — like that of 2008-09 — those investors are few and far between.

Solar energy project finance lawyer Keith Martin believes there’s a 40 percent to 50 percent chance of extending the cash incentive during the lame duck session. If  it is extended — which unfortunately seems unlikely — it will likely be part of a larger bill that will extend  most of the tax cuts implemented by President George W. Bush.

Congress has already begun its session — we’ll be sure to pass along information relative to the incentive program as we learn more.