Job-Creating Renewable Energy Grant Program to Expire Unless Congress Acts

Renewable energy is one of the fastest growing global markets. This is the sector in which millions of new jobs and new technologies will be developed over the next decade. Will the United States be a leader and exporter or a follower and importer?

The 1603 Treasury Grant Program for renewable energy was created by Congress in 2009 as part of the American Recovery and Reinvestment Act. Congress recognized that providing additional incentives to build new renewable energy facilities would be one way to stimulate job-creation and jump-start a shrinking economy in a sector critical to the future of U.S. economic, energy, environmental, and climate security. Yet, in the depths of economic recession and tightening credit markets, renewable energy production tax credits provided little incentive to renewable energy producers to invest in building new facilities.

The program provides a grant of up to 30 percent of a new renewable energy project’s construction cost in lieu of receiving energy production tax credits in the future. New renewable energy projects, which would be eligible for Internal Revenue Code Section 45 production tax credits or Section 48 investment tax credits, are eligible to apply instead for the Treasury grant. In the bioenergy industry, this includes property owners who are planning to build biomass combined heat and power facilities, anaerobic digesters that produce electric power, landfill gas facilities, open- or closed-loop biomass power plants, and municipal waste-to-energy facilities.

The program was extended for one year by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 , extending the date by which construction must begin to the end of 2011. Placed in service dates vary according to the type of power system.

To date, the Treasury Department has provided more than $8 billion in grants for 3,500 new projects in 45 states, resulting in more than $26 billion of new investment in the renewable energy sector. However, of that number, relatively few bioenergy projects have been funded – in large part due to the short time frame of the program. Most bioenergy projects take a number of years to develop and permit – much longer than most wind and solar projects – and thus the December 31, 2011 cut-off date to begin construction was not possible for many bioenergy developers.

The Treasury Grant Program expires at the end of this year, unless Congress renews and extends it. The President included a one-year extension of the program in his FY 2012 budget request, but he did not include an extension request in the recent jobs bill which he sent to Congress. To provide some certainty to renewable energy developers during highly uncertain economic times, and to allow bioenergy producers to participate as well, a much longer, multi-year extension seems warranted.