Renewable Energy Developers Offered Cash In Lieu of Tax Credits

WASHINGTON, DC, July 10, 2009 (ENS)

The federal government will provide direct incentive payments instead of tax credits to renewable energy developers under a new $3 billion Recovery Act program announced today.

The grants are designed to temporarily replace the production tax credit that has been a major factor in the continued growth in wind and other renewable energy projects. The recession and the freeze in the credit markets that began late last year rendered the production tax credit much less useful as an investment incentive.

In previous years, the tax credit was widely used and was considered a successful incentive for encouraging the development of renewable energy. In 2006, about $550 million in tax credits were provided to 450 businesses.

But the rate of new renewable energy installations has fallen since the economic and financial downturns began, as projects had a harder time obtaining financing.

Introducing guidelines for the program today, U.S. Treasury Scretary Tim Geithner and the U.S. Energy Secretary Steven Chu said it will support an estimated 5,000 biomass, solar, wind, and other types of renewable energy production facilities.

"The renewable energy program provides another important avenue for the Recovery Act to contribute to economic development in communities around the country," said Secretary Geithner.

"It will provide additional stimulus to economies in urban and rural America by helping to develop domestic sources of clean energy," Geithner said. "This partnership between Treasury and Energy will enable both large companies and small businesses to invest in our long-term energy needs, protect our environment and revitalize our nation's economy."

The Recovery Act, enacted in February, authorized the Treasury Department to make direct payments to companies that create and place in service renewable energy facilities beginning January 1, 2009.

A 0.6-megawatt wind turbine stands on the site of the new, mixed-use Forbes Park loft community near Boston. (Photo courtesy Forbes Park/NREL)

Previously, these companies could file for a tax credit to cover a portion of the renewable energy project's cost. Under the new program, applicants would agree to forgo tax credits down the line in favor of an immediate reimbursement of a portion of the property expense.

Energy Secretary Chu said the program is part of the Obama administration's effort to make the United States a world leader in renewable energy technology.

"These payments will help spur major private sector investments in clean energy and create new jobs for America's workers," Chu said. "It is part of our broad effort to double our renewable energy capacity in the next few years and make sure that America leads the world in creating the new clean energy economy of the future."

Both secretaries expect a fast acceleration of businesses applying for the energy funds in lieu of the production tax credit.

Senate Majority Leader Harry Reid of Nevada said he fought to ensure that the Recovery Act would allow for direct payments to stimulate the renewable energy industry.

"I pushed hard to keep this new financing option in the final version of the economic recovery bill so the fledgling clean energy industry could continue growing and creating jobs," said Reid. "This funding will help Nevada and our nation realize the vast potential of our enormous wind, solar, and other renewable energy resources."

"Many of the renewable energy projects in Nevada and around the country that might have been slowed by the economic downturn will now be able to use these incentives to move forward more quickly and confidently, grow our economy, lower our unemployment, and clean up our environment," said Reid.

Today's announcement provides guidance on how the grant process will work. Companies should be able to begin submitting applications later this month.

To expedite implementation of the program, the Treasury and Energy departments are making available the terms and conditions, guidance, and a sample application at http://www.treas.gov/recovery/1603.shtml so that companies can prepare successful applications in advance of the launch of the online application in the coming weeks.

The American Wind Energy Association welcomed the new program.

"The U.S. wind energy industry is very pleased that the Treasury guidance for renewable energy grants is out and is grateful to the administration for making these available. Companies in our industry are anxious to ramp up investments all across America," said AWEA chief executive Denise Bode.

"As with all industry, the economic conditions of the past eight or nine months have held us back," said Bode. "We believe these grants will help get our companies back on track, create more jobs, and balance our electricity portfolio with clean, renewable energy. The implementation of this program for renewable energy will be a welcome boost, just when we all need it."

The U.S. wind industry accounted for 42 percent of new electricity generation installed nationwide in 2008, and created 35,000 jobs that year, bringing the number of people employed in wind power to 85,000. Figures for 2009 suggest a slowdown in new wind projects due to economic conditions.

In addition to the grants, AWEA has been advocating for a strong national renewable electricity standard as a way to send a clear signal to financial markets about the U.S. commitment to renewable energy.

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