New legislation introduced in the U.S. Senate this month will allow qualified renewable energy projects to exchange their tax credits for grants from the Treasury Department. The new measure, authored by senators Dianne Feinstein (D-CA) and Jeff Merkley (D-OR), will fund up to 30 percent of project costs for wind, solar, biomass, and certain other project,s until 2012. This new legislation expands and extends a present-day Treasury Department grant program, which expires in 2010, for two more years. Estimates call for $3 billion in grants to fund $10 billion to $14 billion dollars in capital-intensive renewable energy projects.
What does this mean for green companies? Well, if the measure passes, it will be a resounding success for the alternative/renewable energy industry. Traditionally, renewable energy projects could claim tax credits off their profits. But as the economy ground to a halt, those profits were no longer guaranteed. It also means that large banks, forced into more conservative lending since the recession, won’t be âthe limiting factor on renewable energy development,â as Sen. Feinstein noted.
As helpful as the legislation is, it leaves open an important gap: renewable or âgreenâ natural gas. An array of technologies, including Harvest Power’s dry fermentation and biomass gasification offerings, are capable of producing pipeline-grade natural gas entirely from renewable sources. Under both the existing and proposed legislation, the benefits of either the Investment Tax Credit or the grant are only available if the green natural gas is used to produce electricityâbut not if that same green natural gas is compressed and used as a vehicle fuel or burned directly to provide heating for residential, commercial or industrial applications. The Feinstein-Merkley bill offers a great opportunity to level the playing field amongst all these worthy renewable technologies.
âThe grant program is set to expire at the end of next year, before most construction is expected to occur and well before experts expect the tax equity markets to thaw,â Feinstein added.
With the Treasury grant program, renewable energy developers can nail down affordable, safe financing, so that they can move forward with capital-intensive projects. Before this year, business owners often had to partner with large banks. In exchange for a bank providing equity to the development, they would often charge a fee and claim the 30 percent tax credit on profits. Due to the strain on national banks caused by the recession, that tax equity market funding large-scale renewable developments was frozen. Many major projects were stalled, if not canceled outright. Public power utilities will also be able to qualify for the grants program for renewable energy projects.
Senator Merkley said, âThis bill makes sure incentives for renewable energy keep functioning during this recession and keep acting as job-creation engines.â
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