Obama signs off clean energy tax break extensions

President Barack Obama signed a controversial new tax bill into law on Friday, extending key incentives for the biofuel and renewable energy industries as part of a package of measures that also included tax cuts for all Americans.

After weeks of wrangling between Democrats and Republicans over the content of the new tax package, the bill passed through the Senate and the House of Representatives last week despite opposition from some Democrats furious at the extension of tax cuts for top earners.

Crucially for the renewable energy industry, the package includes a one-year extension of the Department of Treasury Section 1603 grant program, which provides up-front grants to renewable energy developers in lieu of a 30 per cent tax break.

The move was welcomed by renewable industry groups, which had warned of job losses and reduced investment if the scheme had been allowed to lapse at the end of the year.

“This is a great day for America’s solar industry,” said Rhone Resch, president and chief executive of the Solar Energy Industries Association. “With an extension of the 1603 program now in place, the solar industry can continue its record growth, creating new career opportunities for Americans in all 50 states in 2011.”

The bill also includes a one-year extension of the 1603 investment tax credit for renewable energy sources that similarly drew praise from clean energy operators.

“This is a great holiday present for the 85,000 American workers in the wind energy industry, tens of thousands of whom will now be able to get back to work in a sector that has been a bright spot in the recession so far,” said Denise Bode, chief executive of the American Wind Energy Association. “Orders will be on the rise for new wind power, and investors will put more capital into the US economy because of what happened in Congress.”

Controversially, the bill extends tax breaks for ethanol producers and biofuel firms, despite criticism from some Senators who regard many of the tax credits offered to the biofuel industry as over generous.

The bill extends for one year the 45 cents per gallon blenders credit and a 54 cents per gallon import tariff. It also reintroduces a $1.00 per gallon biodiesel credit.

However, the debate over the incentive regime for the industry is expected to continue next year with a number of groups pushing for the tax breaks to be reformed.

Speaking last week, Bob Dinneen, chief executive and president of the US Renewable Fuels Association, signaled that the industry was willing to co-operate with efforts to reform support mechanisms.

“Extending [the tax breaks] would provide the breathing room necessary to fully vet all the ideas on responsible reform of ethanol tax policy, including ideas on how to accelerate commercialisation of advanced and cellulosic ethanol technologies,” he said. “It also would allow for a thorough conversation on all energy subsidies, including those for fossil fuels.”

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