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Federal cash still part of big solar gains


By Jeffrey Ryser


April 08, 2014 - The US Treasury Department's four and a half year old cash reimbursement program for renewable power generation passed a milestone in February, all the while helping to boost solar power generation in the US.


Treasury's 1603 program has now disbursed over $20 billion to almost 9,450 individual projects that have installed approximately 28,000 MW of mainly wind, solar, geothermal, and biomass projects.


The cash reimbursement program, which was established by a Democratic Party-controlled Congress in March 2009 and has been administered by the Treasury Department in conjunction with the Department of Energy, made its first disbursements in September 2009. The federal funds were seen as necessary as the financial panic of late 2008 led to the drying up of bank lending to the sector.


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Under the 1603 program guidelines, developers of renewable projects that are eligible to receive production tax credits can elect instead to receive an investment tax credit or the 1603 cash grant that is equal to 30% of the cost of the construction of a renewable project. Initial projections were for an estimated $6 billion in taxpayer money to be paid out to developers to keep the building of renewable projects moving forward until the return of bank lending.


In the four and a half years, though, through February 1, 2014, the Treasury has reimbursed developers $20.32 billion under the 1603 program. That amount will continue to grow. The program is slated to run through the end of 2016, and big reimbursements are in the offing to the utility-scale solar projects that also received large government construction loans guaranteed by the DOE.


Moreover, developers, mainly of solar projects that began construction of their projects by January 2012 or filed a "placeholder application" by October 2012, are also eligible to receive 1603 cash through the end of 2016.


The 1603 program has, until now, significantly benefited the wind business, though the solar industry in the past year and a half has become the primary beneficiary.


Of the more than $20.3 billion paid out, Treasury has made 420 separate reimbursements worth $13.2 billion to companies that have built almost 22,000 MW of wind generation. The 1603 cash reimbursements gave a particular boost to foreign wind developers whose comparatively low US tax exposure lessened the appeal of tax credits whose value are determined by future power production.


Now, though, there have been 7,650 reimbursements worth roughly $5.3 billion to companies that have installed almost 4,100 MW of solar power. The 1603 cash has played a role in the way companies have organized their lease-based roof-top photovoltaic installation businesses.


Companies lease homeowners the roof-top PV panels for a monthly price that the companies promise will be less than the homeowner's monthly electricity payments made to their utility providers. The installing company borrows money from a bank to buy the PV panels and install them on residential rooftops. Once the installations are completed the company submits its receipts to the US Treasury for reimbursement of 30% of its equipment, installation and labor costs. Rounding out the process, the company then uses the reimbursed cash to service its bank loans.


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