Hill Heat

The Senate Finance Committee will mark up legislation that includes more than $32 billion in energy tax incentives tomorrow, but House and Senate tax writers are split over including a new grant program for renewable energy projects in the economic stimulus bill.

Last week, the House Ways and Means Committee approved H.R. 598, a set of tax measures that included roughly $20 billion in energy incentives. The proposal before the Finance Committee tomorrow mirrors that plan in several respects, including a three-year extension of the availability of production tax credits for wind, geothermal, biomass and other projects.

Both measures would also allow developers to use the investment tax credit – which currently applies to solar and fuel cell projects – in lieu of the production tax credit.

Other common features include: lifting caps on the dollar value of 30 percent investment tax credits for residential wind, solar thermal and geothermal projects; extending tax credits for energy efficiency improvements to existing homes through 2010 and increasing the value of the credit; increasing the size of credits for installing alternative fuel pumps at gas stations; and a 20 percent credit for energy-related research spending in areas including renewable energy and carbon sequestration.

They also share an additional $1.6 billion in so-called clean energy renewable bonds to help fund an array of renewable energy projects. The bonds are intended as a funding instrument for public and cooperative power providers, which are not eligible for the production tax credit. Both packages also provide more than $2 billion worth of energy conservation bonds for state and local projects to curb greenhouse gas emissions. Senate plan has manufacturing credit but no DOE grants

But differences have emerged over how best to give an increased jolt to renewable energy investments that are jeopardized by the economic downturn.

The Senate Finance Committee plan lacks a House provision that allows wind, solar and other renewable energy projects to receive Energy Department grants rather than federal tax credits to help fund projects. The House provision applies to projects placed in service this year and next year.

This funding has emerged as a priority for the renewable energy industry, which says that current tax credits – a mainstay of project financing – do not work in an economic downturn because project backers lack the tax liability to use them. Also, several key banks and other funders – such as Lehman Brothers – have either gone under or face other problems.

The Senate plan would, however, extend the carryback period for business credits - including renewable energy credits - from one to five years, at an estimated cost of $11 billion over a decade.

Elsewhere, it includes up to $2 billion worth of energy-related manufacturing investment credits. These 30 percent “advanced energy manufacturing” credits would go toward creating or retooling manufacturing facilities to make components used to generate renewable energy, storage systems for use in electric or hybrid-electric cars, power grid components that support the addition of renewable sources to the grid, and making equipment used in carbon capture and storage projects, according to the Finance Committee.

Senate Energy and Natural Resources Chairman Jeff Bingaman (D-N.M.) is championing this proposal. “We know that the right incentives will bring vital manufacturing to American soil. When enacted, it will put our country in a much better position to capture the economic potential associated with growing demand for technologies that harness renewable energy resources,” he said in a statement Friday. Bingaman is also on the Finance Committee.

Lawmakers may also seek additions to the bill when the Finance Committee considers it tomorrow. Two members of the committee – Sens. Maria Cantwell (D-Wash.) and Orrin Hatch (R-Utah) – recently introduced a bill, S. 271, that expands incentives aimed at speeding up production and use of plug-in electric vehicles.