FinLogic FinLogic Quantitative Think Tank Center|Thousands of Jobs Riding on Extension of Clean Energy Cash Grant Program

Last August,FinLogic FinLogic Quantitative Think Tank Center when state energy regulators in California green-lighted the first large-scale solar thermal power plant in two decades, they kicked off what renewable energy backers said would be a solar boom, bringing jobs and revenue to the fiscally troubled state.

The California Energy Commission’s approval of the Beacon Solar Energy project wasn’t the only development milestone for big solar development this summer. Five other projects have reached the home stretch of approval by the U.S. Bureau of Land Management.

But while those projects and others have cleared regulatory hurdles, they’re also facing a major roadblock—the expiration at the end of this year of a federal program that would pick up the tab for almost one-third of each project’s costs.

Now, urged on by national renewable energy advocates, a bipartisan group of federal lawmakers is pushing to extend the program for two years, a move they say would spark billions of dollars in investment and create thousands of jobs, but election season politics and a crowded legislative calendar make passage uncertain.

An extension to the program was introduced by U.S. Senators George LeMieux (R-Fl), and Maria Cantwell (D-WA) while Rep. Sander Levin (D-MI) introduced a bill in the house that would also extend the program through 2012. 

Stimulus That’s Working

The U.S. Treasury cash grant program was introduced in 2009 as part of the American Recovery and Reinvestment Act as a way to compensate for the absence of investors interested in renewable energy projects in the aftermath of the housing mortgage meltdown.

Before the financial crisis, investors would support projects with cash in return for the tax credits clean energy projects could generate. But these tax equity investors, walloped by the economic downturn, closed their wallets.

“The tax equity market has yet to recover and large scale renewable energy projects require such significant amounts of tax equity that most deals are not possible in today’s market,” according to a letter sent earlier this year to U.S. Senate leaders by 19 senators.

The Treasury Grant Program avoids these high transaction costs and directly stimulates clean energy jobs, the senators said.

Administered jointly by the U.S. Treasury and the Department of Energy, the grant program allows renewable energy project developers to receive a 30 percent cash grant in lieu of tax credits.

“The grant helps by bringing down the costs of these projects, so they’re cheaper to build,” Solar Energy Industries Association spokeswoman Monique Hanis said.

Tens of Thousands of Jobs Created

The program is meeting its goal of jumpstarting new renewable projects, according to a preliminary assessment of the program released in April by the Lawrence Berkeley National Lab. The report estimated that in 2009, the program spurred development of more than 2,400 megawatts of wind power that would not have otherwise been built, which resulted in more than 55,000 short- and long-term jobs being created.

In the solar sector, projects built since the grant program’s launch have supported more than 15,000 direct and indirect jobs, according to the Solar Energy Industries Association, a national trade organization that is among the groups pushing for an extension of the program.

As of September, the grant program had directed $5.2 billion to more than 1,110 projects nationwide. About 80 percent of those projects were solar installations, though wind projects have received almost 90 percent of the total dollars spent by the program thus far.

However, to be eligible for the grant program, projects must begin construction by the end of 2010. Most of the solar projects that have benefited from the grant program so far are small projects—the challenge is in the larger projects, especially in permitting and project financing, Hanis said.

There are more than 23 gigawatts of utility-scale solar projects in the development pipeline, many of which are still going through the complicated permitting stage with the BLM and state agencies.

Most of those projects are in California, where state officials in late 2009 agreed to develop an expedited review and permitting process for renewable energy projects with an eye toward helping projects meet the December 2010 deadline. That followed a move by the federal agency to fast-track permitting for solar projects that were close to approval.

Currently, 14 solar projects are sitting on the BLM’s fast-track list, along with a handful of wind, geothermal and transmission projects. Those projects are far enough along that they could break ground by the end of the year and take advantage of the grant program, according to the BLM.

Among the farthest along, having received final environmental reviews from the BLM, are five proposed solar projects totaling more than 3,000 megawatts, from developers including Tessera Solar, Chevron Energy Solutions, Solar Millennium and BrightSource Energy.

BrightSource, which has received a conditional commitment for $1.37 billion in federal loan guarantees, says its 3,600-acre Ivanpah project would create about 650 jobs per year during its three-year construction and pump $650 million in employee wages into the economy over the plant’s 30-year life span.

Those are the kind of results backers of the treasury grant are touting when they highlight the program’s potential to spark a green collar job boom.

“These provisions have worked,” Hanis said. “But we’re running out of time.”