Sunday, January 11, 2009

Green Energy in Trouble?

"Obama's economic advisers are negotiating with Senate leaders about how to revive stalled projects in the renewable sector. One issue is how to structure new incentives and whether to increase the current budget year's deficit or figure out a way to push the cost into later years.

It was only three months ago that the wind and solar industries won a long battle to extend renewable tax credits. Wind companies won a one-year extension of a production tax credit and solar companies won an eight-year extension of an investment tax credit. Every dollar of tax credit offsets an equal amount of tax owed.

But many of the banks that were using these tax credits don't need them or can't use them anymore. Lehman went bankrupt, and other investors are uncertain when they will show profits again.

In addition, the Treasury gave a special tax break to profitable banks that acquire troubled ones, thus allowing them to avoid taxation of billions of dollars of future profits for up to 20 years. Wells Fargo, for example, which invested more than $700 million in solar and wind energy projects from 2006 to 2008, may be able to shelter its next $74 billion in profits from taxation because of the tax break it received for buying Wachovia."

***

Advocates of renewable energy, including solar and wind trade groups, are pushing the incoming Obama administration and Congress to make the renewable energy tax credits refundable. That means that if a company has no tax liability, the government would simply write the firm a check for the amount of the tax credit. One advantage of making the credits refundable is that it would not require a new appropriation.

Solar firms are also pressing Congress to let homeowners use federal credits even if local or state governments provide other incentives. In Berkeley, Calif., for example, the city is using its borrowing ability to lower interest rates for homeowners who install solar panels. The city gets the money back over 30 years by raising property tax assessments for solar-powered homes. Currently those homeowners would not receive federal tax breaks on the portion of the cost subsidized by the city.

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Lastly, solar firms want Obama to back a $10 billion government effort to install solar on federal buildings. "The elegant beauty here is that you're not only creating hundreds of thousands of jobs but also saving the federal government money in electricity costs over the next 20 years," Resch said.

No mention of ethanol or bio-diesel.

For those interested in renewable energy, you might want to check out BC Renewable Energy Blog from British Columbia law firm Clark Wilson.

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