The 1603 Treasury Program expired at the end of 2011 sparking much debate over the critical role it plays in growth for the solar industry.  Without the 1603 Treasury Program, providing payments for solar facilities in lieu of tax credits, accessibility to financing for these systems will be much more limited and the solar industry is expected to take a slight hit in installations in the near future. The US Partnership for Renewable Energy (USPREF) expects a 50% decline in tax equity for solar projects- from peak equity levels of $7.5 billion in 2011 to $3.5 billion.  However, growth is expected to continue in the industry due to declining production costs, existing tax equity programs, and general momentum in the market.

From the President to Senate, action has been taken to bring this program back to the forefront of discussion.  In President Obama’s most recent budget proposal, he expressed his support for the clean energy industry by including language on a “Clean Energy Standard,” which would look to produce 85 percent of the country’s electrical power from clean energy sources by 2035 (including solar, wind, nuclear, and natural gas).  Keeping this “Clean Energy Standard” in mind, President Obama also included increased funding and opportunities for the above mentioned energy industries – highlighting the extension of the 1603 Treasury Program for the solar industry.

President Obama’s support for the clean energy industry sparked movement in Congress to bring the President’s suggestions to life.  Senator Jeff Bingaman (D-NM) answered the President’s call for improvements and greater support for the clean energy industry by proposing legislation that would establish a Clean Energy Standard for America.  Moreover, Senator Debbie Stabenow (D-MI) took similar action by introducing an amendment to the Highway and Transportation Bill (S. 1813) that would extend the 1603 Treasury Program, as well as many other renewable energy-related programs (S. Amdt. 1812).

Sen. Stabenow introduced the amendment on Wednesday, March 7, 2012 and was joined by many of her colleagues on either side of the aisle who introduced their own partisan energy-related amendments.  Senator Jim DeMint (R-S.C.) introduced an amendment that would put an end to energy subsidies, while leaving oil and gas incentives untouched (Senate Amendment 1589).  Less than a week later, the Senate passed the transportation bill without the presence of Sen. Stabenow’s amendment, which failed to receive bipartisan support with a 49-49 final vote.  In a small victory for the industry, DeMint’s amendment failed to pass during the March 13 vote.  Other amendments supporting the advancement of the renewable energy industry and the energy independence of our country failed to reach approval as well.  With a lack of full support from the Democrats and immense opposition on the Republican side, the partisanship of Congress created a harsh environment to ensure the passage of this amendment.

The benefits of the 1603 extended well beyond large-scale solar projects. The majority of the 5,000 solar firms in the US are small businesses, many of which have benefitted on some level from this program to acquire capital for their projects.  These companies, otherwise unable to monetize the various tax equity incentives because of a lack of immediate capital, have been able to create successful businesses through the section 1603 grant. In 2011, the 1603 grant filled a $3.5 billion void in demand for financing that totaled $7.5 billion.  The program created a low-risk cash transfer for projects, aiding the industry to grow at astronomical rates during its lifecycle, as well as lower capital costs to the producer and subsequently lowering consumer costs.  It enabled the solar industry to reach grid parity in Hawaii and California, and placed it on the same track for several other states.  The USPREF estimated that the 1603 grant created about 155,000 direct industry jobs, with the potential to create an additional 37,000 if renewed.

However, the opposition points to the failure of large-scale, capital-intensive projects as wasted expenses, funded by taxpayer money.  The program did not limit eligibility based on the size of the system. Therefore, all levels of the commercial sized system can qualify.  Perhaps future attempts to extend the 1603 grant should contain language that would target smaller commercial systems from larger commercial systems, which can qualify for tax equity incentives. Limiting the size of qualifying systems would shrink the magnitude of the funds supplied by the grant, thus reducing the size of the losses when they occur.  This will not only continue to benefit businesses that have thrived under the availability of cheap and reliable capital, but could also placate the Congressional opposition that highlights the loss of revenue from costly failed projects.

Sol Systems will continue to track any progress of this grant and any other initiatives supporting the solar industry on the federal level.  Please also check out our blog for updates on state legislation as well.

About Sol Systems
Sol Systems is a solar energy finance and development firm that was built on the principle that solar energy should be an economically viable energy solution. With thousands of customers and hundreds of partners throughout the United States, Sol Systems is the largest and oldest SREC aggregator. We provide homeowners, businesses, solar installers, and developers with sophisticated financing solutions that help make solar energy more affordable. Sol Systems also helps energy suppliers and utilitiesmanage and meet their solar RPS requirements efficiently by providing them with access to diverse portfolios of SRECs. For more information, please visit http://www.solsystemscompany.com.