US solar industry fights for Section 1603 subsidy extension

Share

The urgent appeal by the U.S. trade association to avoid the end-of-year sunset provision came just one week after Jonathan Silver, the head of the U.S. Department of Energy’s (DOE’s) loan guarantee program, resigned amidst controversy over the Section 1705 financing provided to recently bankrupt solar panel manufacturer, Solyndra.

Until the end of September, most renewable energy developers sought to benefit either from:

  • Treasury grants in lieu of investment tax credits (known as Section 1603 grants); or
  • DOE loan guarantees (known as Section 1703 and Section 1705 programs).

In order to remain eligible for Section 1703 and 1705 loan guarantees, applicants had to have commenced construction on their renewable energy projects by September 30. The program is no longer considering applications.

Now, the Section 1603 Treasury program is also set to expire, on December 31; ergo SEIA’s request for an extension.

As of mid-September, the 1603 program had funded 19,875 renewable energy projects at a cost of $9.2 billion, estimated to generate 35 terawatt-hours (TWh) in electricity. The majority of projects funded to date under the program have been solar, at 19,246 deployments. Meanwhile, there were 40 biomass initiatives, 50, geothermal, 443, wind and 96 other. Most have been located in the states of Texas, California, and Illinois.

According to the Economic Impact of Extending the Section 1603 Treasury Program report released on October 12 by SEIA and prepared by EuPD Research of Bonn, Germany, a one-year extension of the 1603 Treasury program through 2012 would have the greatest impact on economic activity in 2012 and 2013; and would enable growth through 2016, as projects complete construction and come online.

Specifically:

  • An additional 37,000 jobs would be supported by the solar energy industry in 2012, a 12 percent increase over baseline.
  • The additional cumulative capacity installed from 2012 through 2016 would be about 2,000 megawatts (MW) over baseline – enough to power 400,000 homes.

The report also analyzed scenarios for two- and five-year extensions of the program. An extra two years would yield 51,000 additional jobs in the solar energy industry in 2013 – a 16 percent increase over baseline – and would result in 3,600 MW of cumulative additional capacity installed from 2012 through 2016. A five year extension, on the other hand, would support an additional 114,000 jobs in the solar energy industry in 2015 – a 32 percent increase over baseline – and would result in 7,300 MW of cumulative additional capacity installed from 2012-2016.

"More than 100,000 Americans work in the solar industry – double the number [who worked in that sector] in 2009. Solar is a proven job creator at a time when the unemployment rate for the country remains stubbornly high," said Rhone Resch, president and CEO of SEIA. "The 1603 Treasury program has been the single most effective policy driving renewable energy growth during the past two years."

He added, "At a time when President Obama and Congress are looking for solutions for America’s jobs crisis, it would be unconscionable to allow this proven job-creating program to expire.

"Killing the 1603 program amounts to a tax increase on the thousands of small businesses that are creating jobs in solar. The bottom line is that our capital markets are still in trouble and this program is needed today as much as it was when it was created. Allowing it to lapse would kill jobs and severely restrict the market’s ability to leverage private sector capital to finance new domestic energy projects. Congress must extend the 1603 program to help the American economy."

The extension request has other industry proponents: The American Biogas Council is circulating a petition on the White House’s We the People website "to seek government support on extending the deadline for Section 1603, a grant program which helps to fund renewable energy projects" – "or better yet, [to] eliminate the ‘sunset provision’ altogether."

In addition, venture capitalists are endorsing the request. "If the grant program went away, the cost of renewable energy will increase significantly," said Ed Fenster, CEO of SunRun, a San Francisco company that raises capital from banks and other investors in order to finance solar energy installations and sell the electricity to consumers through leases and power purchase agreements. "The program is the single most effective thing this country can do to create more renewable energy."

The program had previously received a one-year extension in December 2010 from Congress as part of the Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010, at an estimated cost of $3 billion, but Fenster told Forbes magazine that he isn’t optimistic that Congress will extend it again, given that both the Republicans and Democrats are trying to reduce federal spending and fighting over what costs to cut. Republicans, in particular, take a dim view of any program that is part of the stimulus package.