Solar, Wind Stocks to Ride Tax Cut Tailwind
(Solar, wind cash grant, tax cut story, updated with details of extender)
WASHINGTON D.C. (
) -- The pet legislative project of the solar and wind industries -- the Treasury cash grant program that was set to expire at year-end -- made it into the massive tax cut legislation. Senate Majority Leader Harry Reid unveiled the package late on Thursday, and one of the sweeteners included is the extension of the Section 1603 cash grant program that originated in the financial crisis stimulus legislation.
The news wasn't a big surprise, as comments by key senators on Thursday afternoon indicated that the cash grant program was back in, though it did mark a comeback for a lobbying effort for the wind and solar industries which some watchers thought was doomed when it wasn't included in the tax cut legislation package introduced earlier this week and negotiated by the White House and Congress.
>>Solar, Wind Cash Grants: Not Dead Yet
Both the solar and wind industry have spent the past year lobbying to convince Congress to extend the cash-grant program for renewable energy projects.
As previously detailed on
TheStreet
,
the cash grant program is big business for the solar and wind industries
. It wasn't just the solar and wind industries' trade groups pleading for a last gasp inclusion in the tax cut package, but the National Venture Capital Association, as well as progressive think tanks like the Center for American Progress, key Democratic Senators, including Sen. Dianne Feinstein (D-Calif.) and Washington Senator Maria Cantwell.
Feinstein noted in an op-ed piece on Thursday fighting for an extension of the cash grant program and penned for
Politico.com
that the program "is rightly credited with maintaining growth in the renewable energy sector in the middle of an economic downturn. ... The program has, so far, supported roughly $18.2 billion in clean energy investment to build 8,600 megawatts of renewable energy generation, according to Feinstein's data.
Farm state Democrats also gained inclusion for a key ethanol incentive.
All the major U.S. solar companies have project pipelines which would benefit from the extension of the cash grant program, including
Fist Solar
(FSLR) - Get Report
,
SunPower
( SPWRA) and
MEMC Electronic Materials
(WFR)
.
The loss of the cash-grant program would have had broad implications for all solar module and solar inverter companies as optimistic 2011 forecasts are being spun predicated on a much larger U.S. marketplace for solar installations. While the biggest of big projects will be able to secure financing without cash grants, the entire market size for solar -- and the ability for solar product suppliers to sell into the U.S. project market -- could have been significantly impacted by a lower overall number of projects able to secure financing.
New Jersey Congressman Rush Holt was a key figure among House members pushing for the cash grant, and his spokesman Zach Goldberg made the case on Thursday afternoon that the cash-grant program is a jobs creation act.
"This isn't just about clean energy, but about jobs," the Holt spokesman said. "This isn't a philosophical debate. Business have created actual jobs because of the cash grant," Congressman Holt's spokesman added.
The U.S. wind industry, coming off its worst year in recent times, needed the extension of the cash grant as much as any renewable energy segment.
Denise Bode, CEO of the American Wind Energy Association released a statement late on Thursday saying, "This is a great day for American workers. We have a lot of work to do to ensure that this victory is upheld, but we saw an outpouring of support that was truly inspiring. Factories across the country will restart production lines, recall workers, and avoid layoffs that would have followed the loss of this key incentive for wind energy, which with consistent policies like this one can generate 20% of America's electricity within 20 years."
Key aspects of the cash grant as written into the tax cut package include:
Simply changing the date of the expiration by one-year. The one-year extension in the deadline to start construction of new renewable energy projects to qualify for Treasury cash grants cover 30% of the project cost.
The bill also would allow a 100% depreciation bonus on new equipment placed in service after September 8, 2010 through the end of next year. The bonus is a timing benefit: instead of depreciating a project over the normal depreciation period, the entire cost could be deducted in the year the project goes into service.
Owners of new renewable energy projects that are completed in 2009, 2010 or 2011, or that start construction in those three years and are completed by a deadline, would qualify for Treasury cash grants.
The deadlines to complete construction will not change. They remain the end of 2012 for wind farms, 2016 for solar and fuel cell projects, and 2013 for other renewables.
-- Written by Eric Rosenbaum from New York.
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