Solar Industry Survives The Fiscal Cliff

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The big renewables winner in the fiscal cliff legislation was wind.

But the solar industry was also spared some pain.

Wind’s $0.022 per kilowatt-hour production tax credit (PTC) was extended through the end of 2013. Crucial language changes allow wind and geothermal projects “under construction” by year-end to qualify for the incentive instead of only those “in production.”

But for solar, “the automatic federal spending cuts, termed sequestration and slated for January 2013, were postponed until March,” REC Solar Legislative Director Ben Higgins explained. “If sequestration had happened, it would effectively have taken still-pending 1603 grants, which provide cash upfront instead of a tax credit, from 30 percent of the investment down to about 27.7 percent.”

The 1603 provision, Higgins explained, “provides two benefits: One, you don’t have to have tax liability, and, two, you get the funds now in the form of a check instead later in the form of a tax credit.” Having it reduced, Higgins said, “would have been a major blow to investor and industry confidence.”

The two-month delay on sequestration “is probably the most important thing this package did,” agreed tax specialist CohnReznick’s Senior Manager Lee J. Petersen. “I would suspect the amount of safe-harbored 1603 projects was fairly robust,” he explained. “We’ve talked to folks in the process of safe-harboring up to $4 billion worth of projects. The bill has given them at least two full months of breathing room.”

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