Update: Last night the U.S. House of Representatives joined the Senate in passing an extension of the Department of Treasury Section 1603 tax grant program -- a boon for the U.S.solar and wind industries.

It was signed by President Obama this afternoon.

To take advantage of the extended deadline, eligible renewable projects must begin construction by December 31, 2011.

The extension was part of the $858 billion Middle Class Tax Cut Act of 2010 which extended the Bush-era tax cuts and other expiring business tax credits. Congress extended several tax incentives which benefit the renewable energy and greentech sector including ethanol credits and biodiesel credits as well as appliance efficiency standards.

Industry reaction has been overwhelmingly positive.

“This has been a monumental week on the policy front for renewable energy,” said Marie Schnitzer, director of solar services at AWS Truepower. “Four major announcements -- from the extension of the Treasury Grant program and the approval of California's first feed-in-tariff, to the DOE-DOI announcement regarding public land suited for solar, and the California Air Resources Board’s movement to implement cap and trade in California -- all have the power to generate meaningful market opportunity for renewables and drive record wind and solar adoption in 2011."

***

(earlier article)

The U.S. Senate passed of a one-year extension of the Department of Treasury Section 1603 tax grant program in their tax bill compromise. Senators Cantwell, Feinstein, Ensign and LeMieux led the effort to extend the grant program, which has to a large extent helped drive the growth of solar in the U.S. in the last year.

The United States Tax Grant Program (TGP), also known as 1603, has been the main driver for the strong growth of solar in the U.S. in 2010. To date, 1,179 solar projects with total investments of over $1.3 billion in 42 states have been built with support from this program.

It's not exactly a long-term visionary energy policy -- but it will keep U.S. solar industry growth in high gear. And it will keep the U.S. wind industry afloat.

In 2009, the U.S. installed about 435 megawatts of solar. That doubled to about 1,000 megawatts in 2010 and many forecasts point to 2,000 megawatts installed in 2011.

Vincent DeVito, a Partner at Bowditch & Dewey, LLP in Boston with a focus on energy and cleantech, has been part of this debate and the only negative he could identify with the grant program is that "the current program is not capped. So, it does not fit in the government expenditures 'setoff' narrative. Also, the original reason for the current program was the lack of a tax equity market. That is not as strong an argument now as it was in 2009."

Here's some of our recent coverage of 1603:

According to Rhone Resch, the CEO of the Solar Energy Industries Association (SEIA), 1603 has leveraged $18 billion in renewable energy projects for "an incredible return on the taxpayer dollar." He added that 1603 is "simply the most important policy for continuing renewable energy growth in the U.S." The 1603 grant provides a direct payment rather than a tax credit and was implemented to address the lack of available tax equity during the financial meltdown.

"SEIA has dropped everything to focus on this," according to Resch. He added, "This program has created jobs in all 50 states," and observed that the value is not just to solar, wind or renewables, but to manufacturers of glass, steel, aluminum and copper wire.

He urged politicians to put partisan bickering aside and extend the credit.

Solar in the U.S. has more than doubled this year to approach or exceed 1,000 megawatts, in no small part due to 1603. The wind industry has struggled this year, but would have struggled even more were it not for the tax grants.

According to Resch, "Tens of thousands of jobs are at risk." Denise Bode, the CEO of the American Wind Energy Association (AWEA), is concerned over job losses without access to tax credits and worries that workers from the "renewable energy sector will be in unemployment lines."



Certain factions in Washington, D.C. don't want to renew the tax grant. The catch is that the 1603 grant provision was actually passed during the Bush Administration. There is a sense that Republicans don't want to support anything with the scent of the American Recovery and Reinvestment Act (ARRA) upon it.

This vote remains crucial for the growth of the of the solar and wind industry. Julie Blunden, VP at SunPower, said that uncertainty about the tax grant is forcing SunPower to make "sub-optimal decisions in order to make the deadline" in the way the firm implements its solar projects. Blunden noted that SunPower has booked $100 million in solar business in the last month.



It's not just large-scale solar that will feel the pain. Resch noted that tax equity and grants are what keeps solar residential financing companies like SolarCity, SunRun and Sungevity in business.



Solar employs 93,000 people in the U.S. according to Resch, and the solar industry can create more than 60,000 jobs in the next few years if 1603 is extended. Resch expected contraction in the U.S. solar industry in 2011 without the tax grant. Bode from AWEA expected the U.S. wind industry to be flat or down without the tax grant.



Resch has urged the CEOs in the solar industry to contact government officials to keep the tax grant in place.