Revived Tax Credit A Boon To Renewable Energy Industry

Wind power and solar energy owners throughout the US should celebrate the revived tax credit extension for renewable energy industry, a plan that was almost aborted but was brought back to life bundling to the $700 billion bailout plan.

The tax credit bill, worth of $78 billion of tax relief, is an extension from an existing plan which set to expire at the end of this year. The bill will help offset the high production cost of renewable energy and bring competitive cost advantage to the industry for producing and using renewable energy.

Without it, the industry is going to suffer from high production cost and lose the edge to compete with the conventional energy.

This is how much a renewable energy company would save (example from a story by Sand Jose Mercury News):

"A typical five-kilowatt solar system costs about $8 a watt, or $40,000." "With the California rebate of $7,600 and the $2,000 federal tax credit, that's an out-of-pocket cost of about $30,400. With the removal of that $2,000 cap, the credit grows to $9,700 and the net cost falls to $22,700."

That's big savings.

That was why the owners of windmills and solar power plants were feeling "the cloud hanging over us" when the bill was in a stalemate over the past several months as Congress debated how to pay for it. The House of Representative rejected the bill on September 29 after The Senate said yes the week earlier.

Many renewable energy entrepreneurs know exactly what it means to them if they lost the tax credit. A similar tax credit bill boosted and busted the solar hot-water industry in the 1980s. A dozens of small businesses spawned under the tax rebate program all went out of business when the incentives abruptly ended.

Luckily, the renewable energy tax credit extension was revived when the government tried to pass the $700 billion bailout plan early October. After The House vetoed the first draft of the bailout plan, it had a chance to revise and bundled the tax credit bill into the new version, which was passed later that week.

The extension allows the wind power production to enjoy tax exemption for another year and solar energy companies will have another 8 years of investment tax credit for business and homeowners to install solar energy equipments. The bill also extended a $1 per gallon tax credit for biodiesel through 2009. Buyers of plug-in electric cars will receive Federal tax credit ranging from $2,500 to $7,500.

Finally, the cloud over the industry dissipated and they "had a sense of relief," said Peter Detering, chief executive of Tioga Energy, a San Francisco company that finances solar deals for commercial customers, during an interview with San Jose Mercury News.

John Berger, chief executive officer of Texas-based Standard Renewable Industry, said during an interview with Reuters (the story) that:

"We are at a critical time period in the solar industry in the country and around the world. We are just starting to see some economies of scale, some prices decreasing in the solar panels. Having the 8-year extension will absolutely cement in place getting solar to be part of conventional energy."