Solar grants extended 1 year

Dec 29 - McClatchy-Tribune Regional News - James M. O'Neill The Record, Hackensack, N.J.

Congress has extended for a year a federal grant program that helps companies defray the cost of installing solar energy panels.

The program, which was set to expire at the end of the month, has directed more than $72 million to New Jersey companies and has been credited with preserving or generating more than 20,000 jobs nationally in the solar power industry.

The one-year extension was good news for the relatively new start-ups that have been advising companies interested in solar, as well as the contractors who do the installation.

"It was a very big Christmas present for the industry," said Jamie Hahn, managing director of Solis Partners, a Manasquan company that designs solar panel systems for commercial clients.

"This extension is critical to keep our industry's momentum going," Hahn said. "Another year of grants will certainly allow us to continue to grow our business and create jobs in New Jersey."

Hahn's company, only a few years old, doubled its staff this year to 15, and plans to double again in 2011.

In addition to extending the grant program, which pays companies and non-profits 30 percent of their solar projects, Congress also made it more enticing: Companies will be able to write off the full depreciation on solar equipment in the first year after installation rather than over five years, providing a bigger upfront cut in taxes.

"The depreciation component makes solar projects even more attractive now," said Adam Putter, president of Solar Roof Development in Fort Lee.

Hahn said the depreciation will enable companies to break even on their investment in three or four years.

The grant program, created by Congress in 2009 as part of the economic stimulus package, was designed to provide companies a more immediate source of money to cover the costs of installing solar panels than an existing tax credit provided. "There's a big difference between waiting a full year to get the tax benefit versus getting the grant checks within 60 to 90 days," Putter said.

There were several advantages to the grant program over the tax credit, experts say. With the economy in recession, many smaller companies were not generating enough revenue to benefit from the full 30 percent tax credit. And non-profits could not benefit from a tax credit at all.

In addition, under the tax-credit program, most of the benefits were ending up with third-party investors rather than the companies that decided to install solar on their buildings, Hahn said.

Before the program, the bulk of solar projects were handled through a "power purchase agreement," in which a building owner brought in a third-party investor -- usually a big financial services firm looking for tax credits -- who paid for the installation and sold the energy back to the owner at a reduced rate, Hahn said.

But the investor reaped the 30 percent tax credit and any state benefits for generating renewable energy.

In New Jersey those benefits include solar power credits, or SRECs, for each 1,000 kilowatt hours of renewable energy produced. SRECs can then get sold on the market for about $615 each, generating extra revenue for the investor. In New Jersey, power providers are the main purchasers of SRECs, because under law they must produce a portion of their energy through renewable sources, such as wind or solar.

The grant program makes purchasing the solar array more affordable to a building owner, since the owner can benefit from the grant and any SRECs generated, Hahn said.

Nationally, the grant program, known as the 1603 Treasury Grant, provided $5.5 billion for more than 1,450 renewable energy projects through late November. The majority of those projects -- 1,179 -- have been solar, totaling $416 million in grants, according to the Solar Energy Industries Association.

New Jersey has received the second-largest chunk of money, after California. It also has more solar projects than any state other than California, and the most nationally on a per-capita basis.

"The grant program was a huge driving force in the industry the past six to nine months because companies everywhere were rushing to have their solar projects qualify before the program ended," Putter said. "Many banks were willing to finance projects only if companies could first secure the grant, and I see that continuing."

He said some banks were accepting the grant approval as a down payment, so companies interested in solar projects could put no money down to get their project started, Putter said.