The U.S. solar industry is lobbying Congress to extend a tax break that’s helped it more than double in size over the past two years.
The Section 1603 Treasury Program, enacted in 2009, enables developers of renewable energy projects to receive a grant, in lieu of a tax credit, when their projects come on line. This program “has been the single most effective policy driving renewable energy growth during the past two years,” said Rhone Resch, president and CEO of the Solar Energy Industries Association.
The program is scheduled to expire, however, at the end of this year. If Congress is serious about creating jobs—and supporting renewable energy—it should extend this break for another year, Resch said.
A study released today by SEIA estimates a one-year extension of the program would support 37,000 additional jobs in 2012, and add enough solar capacity over the next five years to power 400,000 homes.
If the program isn’t extended, Resch said, the U.S. solar industry will “face a difficult time going forward.”
Here’s why: Congress created a 30 percent investment tax credit for solar projects in 2005. Solar developers, however, usually don’t have enough profits to benefit from a tax credit. Until the financial crisis of 2008 hit, they relied on financial firms to buy these tax credits from them as a way of raising the money they needed to finance their projects. These “tax equity” investors disappeared, however, in late 2008, and most still haven’t returned, Resch said.
In 2009, Congress addressed this problem by allowing solar developers to take a direct payment from the Treasury Department, for the same amount the tax credit would be worth. This helped thousands of solar projects get off the ground, at little added cost to taxpayers. More than 100,000 Americans are now employed in the solar industry, twice as many as there were in 2009, according to SEIA.
Over the next two or three months, solar developers will be lobbying Congress to extend this break. They think they’ve got a good shot, despite the black eye the solar industry has received from the bankruptcy of Solyndra, a solar manufacturer that went belly-up after receiving a $535 million loan guarantee from the Department of Energy.
Resch said solar companies employ people all over the nation, “in both red and blue states,” including Michigan, the home of Representative Dave Camp, a Republican who heads the House Ways and Means Committee, which has jurisdiction over tax policy. Camp has been a strong supporter of the solar industry in the past, Resch said, and Republicans in general have supported extending tax breaks instead of letting them expire.
The challenge for solar will be to find a legislative vehicle to catch a ride on—not many bills will make it through this bitterly divided Congress before the end of the year.
But if Congress wants to create jobs, this should be an easy sale.
The 1603 grant is not a new, unproven program that will take time to roll out, Resch said—“it’s simply an adjustment in the tax code that makes an existing tax credit work better.”