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Wind power is facing a make-or-break moment in Congress, with renewable-energy firms' projects on hold as lawmakers debate whether to extend subsidies for new wind farms this month.

Currently U.S. tax credits are available only for facilities that come online before the end of 2012. Iberdrola Renewables, the second-largest U.S. wind operator, has suspended work on new U.S. projects for "anything we can't build in 2012," said Rich Glick, vice president of government affairs for the unit of Spain's Iberdrola SA.

Industry players see two main chances for Congress to act this year. One comes in February, when the wind subsidies could be tacked on to an extension of payroll-tax cuts. The other would come in the lame-duck session after November elections, when lawmakers must address the expiration of tax cuts from 2001.

The tax credit has helped bring down the cost of wind power, making it more competitive with rival producers, but wind's backers say they need a few more years to build out a U.S. supply chain. The sharp fall in U.S. natural-gas prices has made this a particularly sensitive moment for wind energy by giving gas-fired power plants an extra cost advantage.

Previous delays in extending the wind-farm tax credit have led to drop-off in wind installations. The credit, designed to help level the playing field with coal and other fossil fuels, is worth 2.2 cents per kilowatt-hour of electricity produced during the first 10 years a wind farm is in operation.

A delay could also stunt efforts to bring down the cost of wind-power technology. "We face the loss of domestic expertise and the momentum to build a strong domestic supply base," said Luis Miguel Fernandez, chief corporate officer for the North American arm of Spain's Gamesa Corp., which has a factory in Pennsylvania.

Last month, Vestas Wind Systems said it will cut 1,600 U.S. workers if the tax credit isn't renewed, on top of 2,300 jobs it is already shedding world-wide. An industry-backed study by Navigant Consulting said in December that thousands of additional job cuts could occur if the credit expires.

About 6.8 gigawatts of wind power were installed in the U.S. in 2011, bringing the total nationwide capacity to nearly 47 gigawatts, enough to power about 12 million homes at any given time, according to the American Wind Energy Association. That is about 3% of total U.S. generating capacity.
 
Without the wind tax credit in place, Navigant said, about two additional gigawatts of wind capacity would be installed in 2013, as opposed to more than eight gigawatts expected to be added in 2012, when the tax credit will still be in place.
 
Other predictions are more dire. Iberdrola's Mr. Glick said there would be "close to zero" gigawatts of wind capacity installed next year without an extension soon.

Some in Congress say it is time to end subsidies for renewable energy. The wind industry "simply cannot continue to rely on the American taxpayer," said Rep. Mike Pompeo (R., Kan.), who has a bill that would cut many energy-related credits from the tax code. "Each time it comes up to a year of expiration, they say, 'If we just get a few more years our technology will mature and we will become more competitive.' It's time for them to figure out how to do that."

The industry's supporters argue that Chinese manufacturers also get government support, and they say companies need more time to build a U.S. supply chain and drive down costs.

Denise Bode, president of the American Wind Energy Association, said that in several years' time "we will not need" the tax credit but losing it now could stunt efforts to attract new investment.

Some U.S. facilities may keep going without the credit, thanks to foreign demand and mandates in many states for utilities to buy increasing amounts of renewable power.

Twenty-three governors have backed a bill that would extend the tax credit by four years. Senate Majority Leader Harry Reid (D., Nev.) said late last month the credit is "extremely important" and suggested it should be included with the extension of the payroll-tax break.

Some House Republicans have supported the four-year extension. But Rep. Dave Camp, a Michigan Republican and lead House negotiator on the payroll-tax bill, has said energy tax credits shouldn't be part of the payroll-tax discussions.

Original Article – Wall Street Journal

Generating electrical power from natural resources is both desirable as a power source, and beneficial in protecting the environment and economy by shrinking our carbon footprint, and lessening our dependence on foreign sources of energy. Solar power development is currently supported by incentives, grants, and credits that subsidize system installation. However the shelf-life of these incentives is limited, expiring as of December 31, 2011.

Solar installations, which can be freestanding, mobile, or rooftop mounted systems on both commercial and residential property are subject to few, if any, permitting requirements than other renewable sources. Rooftop solar panel installations, in particular, have become viable as a renewable energy source.

Three important renewable energy incentives are

(a) Federal Grant -- The Section 1603 Treasury Grant Program allows the Federal government to provide a grant of 30% of the cost of a solar installation if construction begins by 12/31/11.

(b) State Incentives -- In Massachusetts, an owner of solar equipment earns Solar Renewable Energy Credits (SREC's) for each megawatt-hour of electricity produced. In January 2010, MA approved an SREC market and set a renewables portfolio standard requiring that, by December 2020, electricity suppliers that serve retail customers include 15% renewable energy in the electricity they sell. Electrical suppliers can provide renewable energy or buy SREC's to meet these standards. The market has established a price range of $285-$600 for each SREC.

(c) Depreciation -- the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 allows 100% depreciation in a single year for commercial solar installations, but this depreciation allowance expires on December 31, 2011.
These incentives, when structured correctly can offset almost 60% of the cost of installing a solar system. Additionally, the production of electricity provides revenue from the sale of the electricity produced and/or the reduction in electricity usage charges for power supplied to the grid.

Consequently, for owners of property looking to install a solar system, there are several options for financing:

(i) Self finance the installation of the system and capture the 1603 grant, SREC's, depreciation, and income/savings from the production of electricity to offset the capital investment;

(ii) Contract with a company that will pay for the system and installation in return for the rights to the 1603 grant, SREC's, depreciation, and income from the power generated by the system at a favorable cost; or

(iii) Contract with a company that will pay for the system and installation, and then lease the system back from them. Rights to the 1603 grant, SREC's, depreciation, and income may be negotiable.

As with any deal, the structure, agreements, and terms are paramount. However, current political support and incentives have made this an optimal time to be structuring, installing and financing solar installations. Contact the Cherrytree Group regarding your solar development endeavor.

Aritcle in NEREJ