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Renewable-energy program has chance of extension

Congressional approval could happen as early as Wednesday to extend the 1603 cash grant program, which covers up to 30% of the cost of projects such as solar-panel installations. But amendments could derail the proposal.

December 15, 2010|By Tiffany Hsu, Los Angeles Times
  • Solar collectors that track the movement of the sun are on display at the Solar Power International expo in downtown L.A. in October. Federal grant money supported more than two-thirds of solar and wind projects in construction this year.
Solar collectors that track the movement of the sun are on display at the… (Al Seib, Los Angeles Times )

A federal stimulus program that has helped keep renewable-energy projects afloat during the recession could get a second wind despite industry fears that it might become a casualty of partisan bickering in Congress.

In a last-minute push, a Senate committee cleared the way for congressional approval as early as Wednesday to extend the Treasury Department's 1603 cash grant program, which has funneled roughly $18 billion into nearly 1,500 wind and solar projects.

The program, which covers up to 30% of the cost of renewable-energy projects such as solar-panel installations, is set to expire by the end of the year.

The subsidy is lumped into a larger tax package that is expected to go up for a vote in the House on Wednesday. If it passes, installers of thousands of renewable-power projects in the pipeline — including small rooftop solar-panel installations on suburban homes and sprawling and remote wind-turbine farms — could tap the funds in 2011.

But the renewable-power industry isn't uncorking the champagne quite yet. Several amendments being suggested in the House "could derail the entire bill," said Rhone Resch, chief executive of the Solar Energy Industries Assn., a trade group.

"A one-year extension is an incredible shot in the arm for the industry," he said. "But we don't want to get ahead of ourselves. The compromise that has been worked out is very sensitive and fragile."

Last week, when it seemed the program might expire at the end of the year, renewable-energy companies were panicking. A renewal attempt had been shot down in Congress earlier in the month and then left out of a tax deal engineered by President Obama.

The industry dropped everything and went into lobbying overdrive, making dire predictions that hundreds of thousands of jobs could be lost without the ready government funds and that several years of record-breaking growth could be reversed. Without the program, financing for the sector could plunge 56% in 2011, according to a letter signed last week by Congress members pushing for an extension.

Residential installers cobbled together ads urging homeowners to act fast on solar-panel installations before the deadline. In recent weeks, several large solar projects in the desert also rushed to break ground before the program's expiration.

If the program is allowed to expire, renewable-energy companies could still tap a 30% tax credit, first offered in 2008, that is separate from the grant program. But that credit is seen as less desirable than the Treasury's grants.

Since the Treasury program pumps cash into projects faster, investors were more willing to lend a hand. Buoyed by the steady stream of government support, wind-power capacity has risen nearly 50% since the end of 2008 and solar capacity boomed 130% in 2010 alone.

After residential-panel installer SolarCity lost nearly a quarter of its workers during the recession, executives said, the Treasury program guided the company back to its feet, helped triple its staff to nearly 1,000 employees and coaxed investors back to the market.

Losing the grant would be "the most severe thing that could happen to the industry," said CEO Lyndon Rive.

But even if the program stays open, the industry will probably have to endure the same fight next year.

"We're really just moving the cliff out," said Mike Hall, CEO of solar installer Borrego Solar Systems Inc.

Government incentives for renewable energy have always been start-and-stop, said Jonathan Kim, a power and utilities analyst with Royal Bank of Scotland. The inconsistency makes many investors wary of making long-term bets on the industry.

So when grants and credits are being offered, developers flood the market with projects, then rush to complete them before the funds expire. Companies often agree to pay higher fees for construction and other services to meet the deadline.

Without the Treasury program, the renewable-power industry would be "in a bloodletting situation, where only the strongest will survive," Kim said. "It'd be a perfect storm that could kill off the renewable-energy sector for a while."

But some believe the industry might be too dependent on government handouts if the expiration of a single incentive could snuff it out.

The Treasury grant supported more than two-thirds of all solar and wind projects in construction this year. Homeowners already rely on local programs to shave down the cost of installing rooftop solar panels or making energy-efficiency upgrades. Larger projects use multimillion-dollar conditional loan guarantees from the Department of Energy to attract other investors.

Industry leaders, however, said they weren't looking at the program as a permanent crutch — just something to tide them over until the economy improves.

"We are nowhere near being subsidized to the level of the fossil-fuel industry," Resch said.

tiffany.hsu@latimes.com

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