02 December 2010
As we approach the close of 2010, the status of several Federal renewable energy funding programs hang in the balance. Many of these programs - including the Department of Energy’s Loan Guarantee Program and the 1603 Treasury Grant Program - which contributed to the growth of the distributed solar market this year, are set to expire and their renewal is unclear. Without these programs, the deployment of solar across the United States may stall.
Without these programs, the deployment of solar across the United States may stall.
In 2005, the Department of Energy’s Secretary of Energy became authorized to make loan guarantees to qualified renewable energy projects with the belief that accelerated commercial use of new or improved clean technologies would help sustain economic growth, yield environmental benefits, and produce a more stable and secure energy supply. The Recovery Act of 2009 provided $2.5 billion in appropriations to support up to approximately $21 billion in loan guarantees. Those credit subsidies complement more than $50 billion in additional loan guarantee authority the Department of Energy has to advance nuclear, clean coal, advanced renewables and energy efficiency technologies.
In early November, it was reported that several of President Obama's top advisers, including the National Economic Council Director Lawrence Summers and energy policy czar Carol Browner, recommended termination of funding for the federal loan-guarantee program. Despite pulling money from these programs, antagonizing powerful Congressional allies, it is believed that many of the projects that rely on these loan guarantees will have to move forward without them. As of the writing of this article, the administration hasn't made a decision.
Treasury Grant Program
Another federal program, the 1603 Cash Grant program, is set to expire 31 December, 2010. The cash grant program was implemented during the financial crisis when tax credit investors became scarce and renewable energy projects requiring tax credit investors stalled. The program became an important factor in continuing the expansion of renewable energy as it gave solar developers the option to take a cash grant in lieu of a 30% investment tax credit (ITC), which proved to be much more attractive to renewable energy investors. The program was so successful that several proposals have been made to extend the program. However, at this time, it isn't clear whether or not there’s adequate support in Congress.
The "lame duck" session of Congress must necessarily face a number of key issues that cannot wait.
Not directly tied to renewable energy but never-the-less significant to many distributed energy projects have been the Bond Funding options that enabled schools and municipal governments to affordably install wind and solar projects. Clean Renewable Energy Bonds, Recovery Zone Facility Bonds and Build America Bonds have all been popular financing vehicles used nationwide to develop renewable energy plants and all had sunset provisions in 2010. These programs were very successful and legislation to extend them has already been crafted for consideration by Congress. Like the 1603 Cash Grant program, it isn't clear if there’s sufficient Congressional support to pass the proposed legislation.
The "lame duck" session of Congress, the time between the November midterm election and the seating of the new Congress must necessarily face a number of key issues that cannot wait. Tax legislation, for example, must be addressed prior to major negative changes currently set to occur. It is possible that as part of the legislative give and take to get key issues addressed, extensions to the programs favorable to renewable energy will pass. Conversely, Congress may be so focused on other issues that the renewable energy bills languish until a later time. The renewable energy industries and organizations eager to implement renewable energy technologies anxiously await Congressional decisions expected after the first of the year.
About the Author
Reid Rutherford is Founder and CEO of Photon Energy Services, a developer and integrator of distributed solar-electric generation systems for large-scale energy users. Reid wrote about Commercial Solar Financing in the Solar Novus Today blog.
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