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Wind, Solar Projects Race Expiring Tax Credits

Posted on: Tuesday, 26 August 2008, 06:05 CDT

A congressional stand-off that has blocked extension of federal tax credits for renewable energy projects is setting off a boom in the wind and solar industries. Developers and customers are racing to install systems by year's end to qualify for the credits, which can cut the cost of a large commercial system by 30%.

Wind developer EnXco has spent millions to ensure wind farms in Minnesota and California are spinning this year, says CEO Tristan Grimbert. "We will go the extra mile to be on time."

Randall Swisher, head of the American Wind Energy Association, says 8,000 megawatts of wind energy -- the equivalent of 16 average coal-fired plants -- are under construction, with developers scrambling to finish most by year's end.

Solar panel installations in California are up 74% this year, at least partly due to the tax-break impasse, says Larry Sherwood, a consultant for the Interstate Renewable Energy Council. It's mostly businesses that are racing to beat the clock, says Barry Cinnamon, CEO of installer Akeena Solar.

Sempra Generation is hurrying to finish a solar farm in Nevada, though it hasn't lined up a utility to buy the power. "We stepped out a little bit," says CEO Michael Allman, adding he expects to find a buyer.

Extension of the tax credits has wide support in Congress, but the issue has bogged down in partisan battles. Senate Democrats insist the subsidies -- costing the Treasury at least $1.7 billion a year -- be offset with new revenue, while Republicans insist on an energy package that includes offshore oil drilling. Energy consultant Stow Walker expects the credits to be extended, but Congress plans to adjourn in early October, leaving just weeks to decide.

The boom could be short-lived. Uncertainty about renewal of the credits is causing projects scheduled for 2009 and beyond to be delayed or scrapped.

Abengoa Solar can't get financing for a $1 billion solar thermal plant in Arizona without the credit, says company senior adviser Fred Morse. National Wind says four Midwest projects are in limbo. EnXco's Grimbert has rerouted turbines intended for the Midwest to the United Kingdom. "This is a classic boom-bust cycle, and it's not at all good for the industry," Sherwood says.

If tax breaks aren't renewed by December, up to 115,000 workers could be laid off in early 2009, according to the trade groups for wind and solar.

The wind industry endured similar gyrations in 1999, 2001 and 2003 when Congress let the tax benefit expire. Lawmakers ultimately renewed it the following years, but wind turbine installations fell as much as 93%.

Now, the stakes are higher, because the 2-year-old solar credit is affected for the first time. And wind energy has nearly tripled the past five years.

Source: USA TODAY

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