The Section 1603 grant program which was created under the American Recovery and Reinvestment Act of 2009, whereby eligible applicants and renewable energy projects may receive a 30% cash grant in lieu of an investment tax credit (“ITC”), is set to expire at the end of 2010.

In an effort to prevent this program from expiring, Senators Dianne Feinstein, (D-Calif.), and Jeff Merkley, (D-Ore.) introduced the Renewable Energy Incentive Act (S. 2899) to extend the program until 2012 and to expand the Section 1603 program to continue to spur the development of renewable energy employment, construction, and development.

The Section 1603 grant program has already distributed over two billion dollars to eligible projects and is a key component in financing renewable energy projects given the decline in the tax equity market.

The Section 1603 grant program helps renewable energy developers secure affordable financing to move forward with capital-intensive projects. As noted above, it is currently slated to expire in 2010, but this deadline is well before most large scale renewable energy projects will be ready to begin construction or the tax equity market will be primed to rebound. The legislation will also expand this program to allow public power utilities to participate and will create a new tax credit for solar manufacturing facilities and the construction of large solar projects on disturbed private lands.

The key provisions of the Feinstein-Merkley bill are:

  • Extend the Treasury Grants Program until 2012: The program allows renewable energy developers to take grants, or payments, from the Treasury department instead of claiming tax credits in order to help build projects that require a great deal of capital upfront.  
  • Permits Public Power Utilities to receive Treasury Grants for Renewable Energy: The bill will also allow public power utilities to receive Treasury Grants for renewable energy projects.  
  • Expands the solar investment tax credit to include manufacturing equipment and solar water heaters for commercial and community pools. The bill would allow equipment that makes solar panels to qualify for the 30 percent solar investment tax credit.  
  • Establishes a new solar tax credit for consolidation of disturbed private land with high solar value. The bill would create a 30 percent investment tax credit for the purchase, consolidation, and use of multiple, 100 acre or less blocks of high solarity, disturbed private lands for solar development.