[Congressional Record Volume 155, Number 192 (Thursday, December 17, 2009)]
[Senate]
[Pages S13386-S13387]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. FEINSTEIN (for herself and Mr. Merkley):
  S. 2899. A bill to amend the American Recovery and Reinvestment Act 
of 2009 and the Internal Revenue Code of 1986 to provide incentives for 
the development of solar energy; to the Committee on Finance.
  Mrs. FEINSTEIN. Mr. President, I rise to introduce the Renewable 
Energy Incentive Act of 2009, which is cosponsored by Senator Jeff 
Merkley.
  This act would extend, expand, and improve existing tax incentives 
and grant programs for renewable energy, especially for solar energy.
  Provisions of this act are widely supported by public power 
utilities, environmental groups, renewable energy companies, renewable 
energy industry associations, and labor unions.
  These include, for example: the American Public Power Association; 
the Solar Energy Industries Association; the Los Angeles Department of 
Water and Power; the Northern California Power Agency; the Southern 
California Public Power Agency; the Large Public Power Council, LPPC; 
solar companies including Brightsource, Solyndra, Tessera Solar, and 
Stirling Energy Systems and many others.
  First, the bill would allow renewable energy companies to claim 
grants from the Treasury department, in lieu of renewable energy tax 
credits, through 2012 instead of 2010.
  Second, it would permit public power utilities to claim these same 
Treasury Grants.
  Third, it expands the solar investment tax credit to include 
manufacturing equipment and solar water heaters for commercial and 
community pools.
  Finally, it establishes a new tax credit for solar companies who 
consolidate and develop disturbed private land instead of developing 
our more pristine public lands.
  The most significant provision in this bill would extend the Treasury 
Grants Program established in the stimulus by two years, allowing 
renewable energy developers to continue claiming these grants.
  Section 1603 of the American Recovery and Reinvestment Act 
established ``payments in lieu of tax credits for specified energy 
property'' in order to support renewable energy development.
  The program allows renewable energy developers to take grants, or 
payments, from the Treasury department instead of claiming tax credits 
in order to help build projects that require a great deal of capital 
upfront.
  The provision has reduced the impact of the financial crisis on 
renewable energy development.
  Before the grants program was established, most renewable energy 
developers had to partner with profitable banks, or ``tax equity 
partners,'' in order to take advantage of renewable energy tax 
incentives.
  These big financial institutions would apply tax credits against 
their large profits, taking a cut for themselves along the way.
  But in 2008, when financial sector profits sank, the $8 billion ``tax 
equity'' market largely evaporated.
  Renewable energy development ground to a halt because developers 
could not find tax equity partners.
  Major players in the space, such as AIG and Lehman Brothers, 
disappeared. The banks that still had profits began demanding a much 
higher cut.
  That's when Congress stepped in.
  The stimulus created the Treasury Grants, which allow developers to 
claim their tax benefits directly, instead of partnering with 
profitable banks.
  The U.S. wind industry installed 1,649 megawatts of new capacity in 
the third quarter of this year alone, a boost from the previous two 
quarters and in excess of 2008 levels. Experts credit the Treasury 
grants program.
  Solar is also getting back on track. For instance, SunEdison used a 
Treasury grant in lieu of tax credits to accelerate construction of an 
18 megawatt photovoltaic array--one of the largest in the U.S.
  The firm's CEO told the press: ``That could not have been done 
without this program.''
  The Treasury program is also allowing renewable energy developers to 
attract significantly more debt backing for projects than would 
otherwise be possible, according to recent statements by the managing 
director of energy investments at J.P. Morgan Capital.
  But the grants program is set to expire in 2010, far before most 
utility scale solar projects will begin construction or financial 
analysts predict tax equity markets will recover.
  If the grant program is not extended, bank profits will again become 
the limiting factor on renewable energy development in the U.S., and 
that makes no sense.
  That is why I propose to extend the program two years.
  This legislation would also level the playing field between public 
power and for-profit companies by allowing public power utilities to 
receive Treasury Grants for renewable energy projects.
  Public power utilities serve 45 million American consumers, but they 
are currently prohibited from receiving grants for their renewable 
energy development.
  The basis for this prohibition is that public power utilities are tax 
exempt, non-profit corporations owned by local governments, who 
therefore have not been able to claim tax credits directly on their 
income tax returns.
  But excluding public power from the grants program does not make 
sense.
  Congress created the Treasury grants program specifically to assist 
firms that lacked the ability to claim the full benefits of renewable 
energy tax incentives.
  If we are going to allow for-profit companies to claim these direct 
grants, why would we exclude our non-profit public power utilities?
  So leveling the playing field for public power is fair.
  This provision is also necessary to protect our local community 
utility companies who want to deploy renewable energy.
  The federal grants make building renewable energy projects cost 
effective for rate payers.
  Because public power utilities lack access to these grants, they are 
now frequently establishing complex financial arrangements with private 
developers in order to build renewable energy projects that qualify for 
federal help.
  This is in direct conflict with public power's historic, proven 
business model as a vertically integrated, non-profit.
  It requires our cities and towns to negotiate unnecessarily complex 
deals with Wall Street.
  Let me give you an example.
  Turlock Irrigation District, TID, a public power utility in my state, 
decided to build a 137 megawatt wind farm in 2007.
  They wanted to build and own.
  But to make it cost effective, Turlock signed a contract to buy the 
power, but a tax equity partner would ``own'' the project and receive 
the benefit of the federal production tax credit.
  The contract was extremely complex and costly, requiring the 
participation of an investment bank to find a tax equity partner, an 
equity group to be the tax equity partner, legal counsel for the equity 
group, experts to provide risk advice and engineering advice to the 
equity group; bond counsel to provide renewable asset specialists; an 
operator to run the plant for the equity group; and an asset manager, 
to advise the equity group on the performance of the operator.
  After 2 years and millions of dollars spent trying to finalize this 
deal,

[[Page S13387]]

Turlock learned that the supposedly profitable equity partner, American 
International Group, AIG, wasn't profitable at all.
  AIG backed out and the entire deal collapsed.
  After much analysis, Turlock Irrigation District decided to own and 
operate the wind farm, giving up on receiving any Federal support.
  Larry Weis, the General Manager, explained in a letter to me:

       The bottom line is that TID made a business decision to 
     forego working with a private developer to develop a project, 
     because the complexity of the deal and the dollars spent to 
     arrange it meant that much of the value of the tax credit 
     would go to the equity partners and not pass through to our 
     consumers. Given the facts and the absence of a comparable 
     incentive for consumer-owned utilities, TID made the best 
     choice it could under the circumstances, even though it means 
     our customers will pay more.

  This legislation is necessary to prevent other public power utilities 
from being forced to make this difficult, unnecessary choice.
  Public power utilities deserve access to renewable energy incentives 
comparable to those awarded to the private sector, and this legislation 
will assure that happens.
  This legislation also expands the solar investment tax credit to 
include manufacturing equipment and solar water heaters for commercial 
and community pools.
  The bill would allow equipment that makes solar panels to qualify for 
the 30 percent solar investment tax credit.
  Solar panel manufacturing is moving offshore, to Germany and Asia, 
where support is considerable.
  This financial incentive could jumpstart solar manufacturing in this 
country, and could lead to thousands of new jobs, such as those being 
created at Solyndra's new factory in Fremont, CA. Or those proposed by 
Applied Materials at their proposed facility near Los Angeles.
  The bill would allow commercial pool solar hot water heaters to 
qualify for the solar tax credit.
  Approximately 189,000 commercial pools nationwide--at hotels/motels, 
health clubs, and schools--use fossil fuel or electricity to heat an 
estimated 27 billion gallons of water.
  If the heating systems were replaced with solar hot water systems, 
there would be 1.23 million metric tonnes of carbon dioxide emissions 
avoided annually.
  That is the equivalent of taking 237,000 cars off the road.
  In California, which has 26 percent of all commercial pools in the 
U.S., this provision could significantly reduce pollution.
  Finally, the legislation would establish a new tax credit for the 
purchase, consolidation, and use of multiple, 100 acre or less blocks 
of high solarity, disturbed private lands for solar development.
  Solar developers have focused development proposals on pristine 
public land because it is very difficult, costly, and time intensive to 
consolidate large blocks of disturbed private land from many different 
owners.
  This tax credit will financially reward those firms that are willing 
to go through the trouble of land consolidation, thereby making the 
increased burden of private lands development more appealing.
  Over the last few years, the renewable energy industry has grown 
dramatically.
  Last year the U.S. added more new capacity to produce renewable 
electricity than it did to produce electricity from natural gas.
  A great deal of this growth can be attributed to our renewable energy 
tax policies.
  This legislation, I believe, would continue this growth into the 
future.
                                 ______