Key Vote Due on the "1603" Incentive for American Entrepreneurs
California, Arizona and Wyoming to Stand to Benefit the Most
December 14, 2010 - Washington, DC: The US Partnership For Renewable Energy Finance (US PREF) introduced an analysis that a provision being considered in the pending tax bill stands to save at least $25 billion of renewable energy projects in 17 states in 2011, among which California, Arizona, and Wyoming stand to gain the most.
The issue is a technical change in earlier law about tax credits for renewable energy projects, allowing project owners to opt instead for a cash grant. This provision was created by the staff of the U.S. House of Representatives Ways & Means Committee in January 2009, in the depths of the financial crisis, as a way of keeping the development of renewable energy projects going in the country. It gives the U.S. industry and entrepreneurs flexibility in using the long-standing production and investment tax credits (PTC/ITC). This approach worked. This innovative provision proved to be "good public policy" but it expires on December 31, 2010. The question remains as to whether or not Congress will extend this provision in light of the fact that the financial crisis is continuing in many sectors of the economy.
The PTC/ITC programs were first enacted in 1992, and have been modified and enhanced on a bipartisan basis. As a result of the recent recession and associated financial crisis, the tax equity market for these credits was reduced by as much as 67% from recent market levels and is expected to remain well below these levels for the next two years. The technical change in 2009 provided important market flexibility producing a huge expansion in U.S. renewable energy investment and generation.
US PREF has been leading an educational campaign since May 2010 about the effectiveness of this Treasury Grant Program (TPG), arguing that it is the most important provision in recent times.
"The TGP has been highly effective in driving nearly $9 billion of new private sector investment in U.S. renewable energy projects at a time of financial crisis," said Jeff Holzschuh, Vice Chairman of Morgan Stanley and Executive Committee member of US PREF. He added, "Congress enacted a temporary and effective solution to ensure renewable energy credit programs continued to operate as intended."/p>
Marshal Salant, Managing Director at Citi, added, " Without question, the TGP has been the most effective and successful national policy to promote renewable energy investment and deployment. Continued access to the TGP is urgently needed to maintain investment in renewable energy projects, promote U.S energy independence and security, and protect and create U.S. jobs."
"The credit environment has not recovered from the financial crisis sufficient enough to meet growing market demand for renewable energy project investment," said Pat Eilers, Managing Director of Madison Dearborn Partners and an Executive Committee member of US-PREF. He added, "The policy flexibility allowed for the effective use of the PTC/ITC tax credits, and is essential for continued market growth. It will lead directly to $30 billion in additional U.S. private investment in domestically generating renewable power and 200,000 new, high-quality jobs."
"Extension of the Section 1603 Treasury Cash Grant Program will keep dozens of renewable energy projects going in our country, keep over 100,000 people employed on those projects, and keep President Obama's pledge to double the production of renewable energy in three years," said Michael Eckhart, President of ACORE. "It would help larger-scale projects if the TGP can be extended two years to the end of 2012."
About US PREF
US PREF is a program of the American Council On Renewable Energy (ACORE), a 501(c)(3) non-profit organization. The objective of the US Partnership for Renewable Energy Finance (US PREF) is to unlock capital flows to new, large-scale and distributed renewable energy projects in the United States. To achieve this objective, a balanced and credible group of highly experienced renewable energy financiers from financial institutions, investors, professional services firms, utilities and others, working with leading non-government organizations, have convened as US PREF. US PREF members include Bank of America Merrill Lynch, Citi, Credit Suisse, Deutsche Bank, First Solar, Greentech Capital Advisors, GE Energy Financial Services, Google, Green Order, Hudson Clean Energy Partners, Madison Dearborn Partners, Morgan Stanley, NRG Energy, Skadden Arps, SolarCity, Starwood Energy, Troutman Sanders LLP, US Renewables Group and VantagePoint Venture Partners.
To view all US PREF white papers and analyses, visit www.uspref.org.