U.S. solar & wind incentives on the way?

(By David Ehrlich) - The new U.S. energy bill is missing major cleantech incentives, but a solar lobbying group expects an extension of tax credits in early 2008.The new hotly contested U.S. energy bill was signed into law today by President George W. Bush after being stripped of many major incentives for the cleantech industry.

But those incentives may not sit on the cutting room floor for long. “Although this bill didn’t include an extension of the tax credits, we’re optimistic that we will see another tax title move early in 2008 that’ll include a long-term extension and expansion of tax credits both for solar and for wind,” Rhone Resch, president of the Solar Energy Industries Association, told Cleantech.com.

Earlier this month, the House of Representatives approved a $21 billion energy tax package as part of the proposed bill that had incentives for electricity infrastructure, carbon capture, renewable energy, electric vehicles, and energy efficiency.

But the package was dropped.It was to be funded primarily by repealing tax breaks for Big Oil, raising the ire of the White House, which reiterated its long standing threat to veto the bill.

The Senate dropped the tax package when it received the updated bill from the House, and the House approved the final legislation, called the Energy Independence and Security Act of 2007, yesterday.

“There’s no opposition from the White House or Republicans to extending the tax credits for solar, it’s just a matter of finding the best way to pay for it,” said Resch.

An eight-year extension of the 30 percent business investment tax credit for solar was included in an earlier version of the House bill. The credit program expires at the end of 2008.

“We’re optimistic, with a little more time, and more dedicated focus, we’ll have a bipartisan solution and we’ll see those tax credits extended in the first quarter,” he said.

The biggest winners in the new legislation are producers of biofuel, with the new law setting a Renewable Fuels Standard, or RFS, for annual production of 36 billion gallons of biofuels by 2022, a fivefold increase from current production levels.

Although most current production is corn-based ethanol, next generation biofuels are getting a big boost, with 16 billion gallons of the new fuels standard to be cellulosic ethanol.

In a statement, Jeff Broin, CEO of Poet, said, “An expanded RFS gives confidence to companies like ours who are making a sizable investment in cellulosic ethanol.”

Currently the country’s largest producer of ethanol, Sioux Falls, S.D.-based Poet has plans to convert an existing 50 million gallon per year dry-mill ethanol plant in Emmetsburg, Iowa, into an integrated corn to ethanol and cellulose to ethanol biorefinery.

The U.S. Department of Energy is providing the company with a grant of up to $80 million for the cellulose project, which Poet expects will cost in excess of $200 million.

The legislation also includes the first increase in automobile fuel efficiency in over 30 years, requiring automakers to reach a fleet average of 35 miles per gallon for cars and light trucks by 2020. That’s a 40 percent reduction from current standards.

Although the new Corporate Average Fuel Efficiency, or CAFE, standards were opposed by most vehicle manufacturers, the legislation gained support from unions by including measures to support U.S. auto jobs.

The new law also gives some carrots for smart grids, as well as requires improved efficiency standards for lighting, commercial and government buildings, and appliances such as refrigerators, dishwashers and freezers.

Under the energy act, a new smart grid regional demonstration initiative will be created, allocating $100 million to support research and development in the industry.

As for solar, as well as wind, geothermal, electric vehicles and other technologies left out of the federal incentive pool, companies are likely to continue to work with state legislatures on expanding the field for cleantech.

“The states really have led energy policy in this country for the last 15 years, and we will continue to push at the state level for new solar programs, and I think you’ll continue to see the market grow,” said Resch.

“We do run a risk, however, later in the year, if the investment tax credit is not extended, of watching some portions of the market start to decrease, specifically being the commercial market,” he said.

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