Solar projects are on hold

Advocates of renewable energy predict the House will pass a package of extensions for expiring tax breaks for renewables before the Memorial Day recess. The House has approved similar bills before, including one in February, but prospects in the Senate remain less clear-cut. Some Republicans there say they won’t support any tax “extenders” with hikes in other taxes to offset or pay for the credits. “We don’t know if it’s going to get hung up in the Senate just on the principle of ‘pay-fors,’” says Monique Hanis, a Solar Energy Industries Association spokesperson.

The House neared a vote on a $57-billion collection of tax incentives that the Ways and Means Committee cleared on May 15. The bill’s $20 billion in breaks for renewables include a six-year extension of the investment credit for solar energy and a one-year extension of the production credit for wind projects. It also has a one-year extension for the research-and-development credit, an incentive that has substantial engineering industry support, says Steve Hall, American Council of Engineering Companies’ vice president for government affairs.

The sticking point appears to be in the Senate, where GOP lawmakers have objected to tax hikes to offset the credits. House Democrats dropped controversial pay-fors that they proposed before, such as repealing subsidies for oil and gas companies. Instead, they included offsets Republicans backed in the past, including closing a deferred-compensation break often claimed by hedge-fund managers.

Senate Finance Committee Chairman Max Baucus (D-Mont.) says he is hopeful the new offsets will be more palatable. Baucus and Finance’s top Republican, Charles Grassley (Iowa), introduced their own tax-extension proposal on April 17. It has no offsetting increases.

The Senate in April overwhelmingly passed a renewable-energy tax-extension bill without pay-fors, crafted by Sens. John Ensign (R-Nev.) and Maria Cantwell (D-Wash.). That vote is “proof of the very strong support you have in the Senate when you don’t have the pay-as-you-go” provisions, says Christine Real de Azua, an American Wind Energy Association spokesperson.

Without an extension, new renewables projects will stagnate, industry groups say. Hanis says solar projects expected to generate some 4,000 MW of energy are on hold, including a 280-MW plant planned for Gila Bend, Ariz., expected to be the largest solar facility in the world. The American Wind Energy Association says that when tax credits lapsed before, new wind installations dropped by as much as 93% in the following year. “Clearly the longer you wait, the more dramatic the impact is going to be on the next year,” Real de Azua says.