Renewables lobby takes cheer from House stimulus vote

www.environmental-finance.com/
London, 29 January:

Voting along party lines, the US House of Representatives approved an economic stimulus package that includes substantial investments in the renewable energy sector and critical adjustments to its tax credit structure. By a 244-188 vote with no support from Republicans, the House passed an $819 billion economic stimulus package yesterday that includes $54 billion dedicated to upgrading the US transmission grid, improving energy efficiency, and research, development and loans for renewable energy projects. The Senate is expected to debate its version next week.

Both the House and Senate bills would extend the production tax credit (PTC) for wind energy projects through 2012 and for biomass, geothermal and other renewables through 2013 at a cost of about $13.1 billion over 10 years. The bills would also allow investors in projects that begin operating in 2009 and 2010 to claim the investment tax credit (ITC) rather than the PTC, giving potential investors more flexibility. The PTC is payable over a 10-year period while the 30% ITC for solar facilities can be taken the year the facility enters commercial operation.

Instead of taking the tax credits, though, the House bill proposes that project developers can apply for a Department of Energy grant for up to 30% of the costs of certain renewable energy projects coming online in 2009 or 2010. While renewable energy advocates praised these provisions, they are still pressing Congress to go even further in restructuring the tax credits to make them refundable - that is, allow developers with low or no tax liabilities to claim a government refund of their credit. "I think you'd find a lot of entities would continue to be active in the marketplace under those conditions," said Matt Cheney, chief executive officer of project developer MMA Renewable Ventures in San Francisco.

The House bill would provide loans totalling $8 billion to fund renewable energy generation and transmission projects while the Senate version provides $10 billion. The loans are critical for the solar industry because debt in solar financing deals tends to be expensive, Cheney said. But if the government is providing loan guarantees, debt financiers will be reassured that they will be repaid, lowering rates and improving market liquidity, he said. "It could and will cause debt to be available to solar developers where it otherwise wouldn't be available," said Cheney, whose company recently secured a $200 million financing commitment for new solar projects, despite tight market conditions, using a combination of investment from tax equity player Wells Fargo and debt financing from National Consumer Cooperative Bank.

The House bill devotes $11 billion for research and development, pilot projects and federal matching funds to modernise the electricity grid while the Senate proposal pledges $4.5 billion to improving the grid. The differences in the bills are relatively minor and will likely be resolved when members of both legislative branches meet to craft a compromise bill, said Shelley Fidler, a principal and managing director of the environmental and governmental resources group at law firm Van Ness Feldman in Washington, DC. Congressional leaders hope to have a bill ready for Obama's signature by mid-February.