Senator Charles E. Schumer (N.Y.) and three other Democratic senators have joined to propose legislation that would place limitations on the grant in lieu of tax credits for renewable energy projects under section 1603 of the American Recovery and Reinvestment Act. The concern expressed by Senator Schumer and the other sponsors is that a significant portion of the grants paid so far have gone to non-U.S. companies. Senator Schumer has cited a supposed dependence on foreign-made equipment as evidence that the program is not sound policy and should be limited to projects using American-made equipment and producing jobs in America.

Co-sponsoring the bill with Senator Schumer are Senators Robert P. Casey Jr. (Pa.), Sherrod Brown (Ohio) and Jon Tester (Mont.). Senator Schumer originally stated he would press for immediate passage of his bill but has since backed away from that pledge. Only Senator Schumer is a member of the tax-writing Senate Finance Committee.

The section 1603 grant currently applies to renewable energy projects, such as wind, solar, geothermal and biomass, that are placed in service before 2011 or for which construction begins in 2009 or 2010 (and that are placed in service by certain dates). In its current form, if a project qualifies for the grant, the Treasury Department is required to pay the grant. Senator Schumer's proposal would make payment of the grant subject to the discretion of the Treasury Department. It also would make the grant subject to the Buy American requirements of the stimulus bill, and would require that Treasury conduct an analysis of the "domestic job preservation and creation provided by" a project with respect to which a grant application is submitted. Treasury also would be required to report its findings to the Senate Finance Committee and the House Ways and Means Committee. The proposed legislation would be effective with respect to any project for which Treasury has not paid the grant as of the date of enactment.

It is far too early to predict how this proposal will be received. The proposal is being taken seriously, however. The Obama Administration strongly supports section 1603 and has already come out in opposition to the proposal. All of the various trade associations involved in renewable energy (such as AWEA, GEA and SEIA) are taking immediate action to register their opposition. Their focus will be on the incorrect assumptions underlying the proposal (for example, that it does not create U.S. jobs) and that, if enacted, it likely would destroy the effectiveness of the program.

This proposal must overcome multiple obstacles before it becomes law. We encourage our readers to register their strong opposition with their members of Congress and with the trade associations with which they are associated. The more opposition that is registered, and the longer the proposal drags out, the less likely it is to be enacted.