Hidden in an obscure section of the economic stimulus plan that the U.S. House of Representatives is set to consider next week is a provision that could provide the refundability that has been at the top of the clean-energy industry’s wish list. If it becomes law, the measure could enable the hard-won federal tax incentive, which passed in October and took effect at the beginning of this year, to have a real impact in an economy where financing is scarce.
The problem with the 30 percent investment incentive, as it stands now, is that it relies solely on a tax credit — and in this economy, many companies aren’t earning enough money, or paying enough in taxes, to take advantage of the credits. That has rendered the incentives moot, in many cases. As Ethan Zindler, head of research for research firm New Energy Finance says: If the tax credits are not of use to you, they don’t solve the problem.
At the Clean Tech Investors Summit in Palm Springs, Calif., Thursday morning, Scott Brown, CEO of private-equity fund New Energy Capital, said the tax equity markets “are really dead.” Combined with a much reduced debt market, raising money for new clean power projects is “going to be very difficult unless there are changes in the stimulus bill,” he said.
Chris O’Brien, head of North American development for Oerlikon Corp., said at a panel on Wednesday that the industry needs the stimulus measure to get around the tax equity problem, and from a government perspective, “there’s no incremental cost increase, because the refund and the credit are equal.”
The draft of the economic stimulus bill includes language that would do just that. It would allow companies to receive the same incentive in the form of grants instead of tax credits, effectively creating tax credit refunds, O’Brien said. “That’s the kind of thing that, as drafted, would provide the stimulus to spur short-term investments in new wind and solar projects,” he said. “This is a very gigantic step forward.”
Cleantech insiders have been lobbying hard for this type of provision. Earlier this week, the Solar Energy Industries Association and the American Wind Energy Association teamed up to push for refundable tax credits in the economic stimulus package.
SolarCity CEO Lyndon Rive is circulating an open letter to Congress and meeting with lawmakers to push for the refundability, according to a spokesperson. “The investment tax credit for solar power is floundering because of the credit crunch,” the company said in an email. “Unless the ITC can be fixed, the U.S. solar industry and hundreds of thousands of U.S. jobs are in jeopardy.”
The Senate finance committee is expected to take a look at the bill next week, O’Brien said, as he encouraged the audience to call senators on the committee to push for these measures. The refundability provision “will provide a lot of certainty to financial market and I think will have huge impact on getting those markets started again.”