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.

a

In 2002, Udall and his cousin Mark Udall (D-CO), both members of the House at the time, worked on a bipartisan initiative that five years later won approval in the House. The two freshman Senators are now joining forces with a senior legislator, New Mexico’s Senator Jeff Bingaman.

If passed, such an RES would enliven the renewable energy credit (REC) trade in this country vastly, since there’s bound to be some utilities who will need to fill a gap between their actual renewable energy production and their mandated goal by purchasing RECs elsewhere. And a solid RES would put the US finally on more equal footing with many European countries’ renewable portfolio standards (RPS) and positioning the federal government as an aid to states’ efforts to work towards a clean energy future–rather than the hindrance it has been at times so far.

Having to live up to an RES would put pressure on state utilities to offer incentives to encourage more home and business owners to pursue solar installations. When utilities offer such incentives, they have to get something and out of the deal: and what they usually get out of it is ownership of the RECs produced by your system (even if you have  a small home solar panel installation of 2kw, say, its output is bundled with the output of many other small systems into packages of 1mw–sold as a single SREC). Many states do already offer great incentives, but many more offer few or none. Find out how your state fares with our interactive solar incentive map.

a

Now, in the face of a crumbling economy, Congress may consider transforming the credit into direct payments from the federal government. As reported by Greentech Media,

Language in the draft stimulus bill making its way through Congress calls for turning the investment tax credits that solar power developers rely on into direct payments to investors for the next two years, observers of the bill say.

“On a short term basis – 2009 to 2010 – solar projects will have a Department of Energy program in place to provide for grants to be paid within 60 days up to the eligible tax credit amount,” Chris O’Brien, head of North America market development for Swiss solar equipment maker Oerlikon Solar, said. There is no cap on the amount that can be paid out, he added.

Such payments would clearly provide a boost to the solar sector. As it stands now, there is little demand among investors for the 30-percent credit. Again, here’s Greetech media relaying the sentiments of Rhone Resch, President of the Solar Energy Industries Association, which he expressed back in November 2008:

“The investment tax credits available for solar are a very effective tool when you have the tax credit appetite. When that tax credit appetite starts to decrease, which we’ve seen literally over the last 60 days or so, they become less useful.”

For a while, the setup worked brilliantly: tax equity investors — like AIG, Wachovia and the now-defunct Lehmen Brothers — would provide cash to solar developers in exchange for the tax credit, which they would then use to offset their tax liability. Unfortunately, the arrangement has hit a snag. It’s no secret that 2008 was a rough year for the financial sector. Since few (if any) such banks and investors posted profits, none had a need for the credit. And with the S&P down almost 6 percent on the new year, 2009 isn’t looking much better. As goes January, so goes the rest of the year…

So, hence the current push in Washington to make the 30-percent ITC “refundable” — that is, to put cash directly in the hands of solar developers. Seeing that the solar sector will likely need between $10 billion and $12 billion to keep up growth through 2009, we can understand why Andrew Beebe of Suntech Power suggests that, “the industry really needs this.” Whether Congress will put future American taxpayers on the line for yet another stimulus initiative is anyone’s guess. In the interim, all we can hope is that the solar sector will end 2009 in a stronger position than where it began.

a

After being voted down no fewer than seven times by the House of Representatives (and ten in the Senate), the bill to extend renewable energy tax credits past 2008 has finally passed. President Bush has said he will sign the bill, so the future looks–well, sunny.

The bill maintains the 30% tax credit for commercial installations of eligible renewable energy technologies, like solar and wind, and does something of momentous importance to the average citizen: it continues to extend that 30% credit to residential customers while removing the cap of $2,000 the previous legislation had imposed. Up until now, if you wanted to install solar in your home and spent $40k on a system, you could only claim a $2k tax credit federally; now, you’ll be able to claim the full $12k. It’s a huge stride forward in encouraging residential adoption of renewables.

And it’s amazing news for utilities, which under the 2005 legislation were not able to benefit from this credit but now can. This will hopefully lead to utility-scale renewables finally finding purchase in states where the finances simply were not appealing when compared to tax breaks the utilities could get for developing coal, oil and gas. The news isn’t quite as good for wind, whose ITC’s were only extended for one year, as opposed to solar’s remarkable eight.

What changed the fate of this legislation, whose future looked so bleak not even a week ago? It got bundled into the emergency bailout legislation intended to alleviate our current financial crisis. It seems that the urgency of the bailout plan, along with its expectation that the parties would be doing everything in their power to find common ground, gave it just the push it needed to finally move forward. Divided along party lines as recently as Monday, Congress decided to go through with the $700 billion bailout due to the prevailing sense that the economy had no other effective route to recovery. On Monday, the vote was 228-205; today, it was 263-171. The Senate, after rewriting the bill to include the renewable energy legislation, passed it on Wednesday night by a wider margin of 74-25.

Visit the Solar Energy Industries Association (SEIA) to learn more about what this means for the solar industry in America. What we’ve been handed is the ability to maintain our competitive edge in the global solar market, and to pursue strategies of energy independence here at home.

And also–huzzah!

a