Is US renewable tax credit saga finally nearing its end?

Fears that growth in the US renewable energy sector was about to be halted by the failure of legislators to extend a package of tax breaks that was due to expire last year alleviated somewhat yesterday, after the Senate approved plans to extend $18bn in tax credits for using renewable energy sources such as wind, solar and geothermal.

The proposals, which include measures to provide generous tax incentives for firms installing solar energy systems and purchasing electric cars, still require approval from the House of Representatives. But experts yesterday were confident that the package was similar enough to measures approved by the House last week to secure backing.

In addition, the White House has signalled that it will approve the bill if it passes through the House. White House spokesman Tony Fratto said, "Despite concerns with some provisions in this bill, it's a bill the president can sign, and we strongly encourage the House to pass it".

The news will come as a huge relief to the US renewable energy sector, which had feared that with the Senate rejecting attempts to extend the tax credits on eight separate occasions amid concerns over funding, the incentives would be allowed to lapse.

A study from the American Wind Energy Association (AWEA) warned that a failure to extend the credits would derail recent growth in clean energy and put $19bn in investment and 116,000 green collar jobs at risk.

Shares in US solar firms climbed on the news with shares in SunPower rising four per cent and First Solar Inc's stock up 3.6 per cent.

Under the proposals, which form part of a bigger tax bill, tax credits for residential and commercial solar systems would be extended by eight years, while credits for wind energy have been extended by a year and those for marine renewables, such as wave and tidal power, have been extended by two years.

There would also be a big boost for microgeneration systems with homeowners that install solar energy systems and businesses that install solar, wind, geothermal or marine energy systems eligible for a 30 per cent tax break.

Homeowners would also receive a 10 per cent tax credit for making energy efficiency improvements, while tax credits of between $2,500 and $7,500 would be made available on plug in electric cars.

The package is to be funded through increased taxes on the oil industry, although some environmentalists voiced fears that aspects of the bill could be used by oil firms to write off the cost of expanding refineries for processing oil from controversial shale and tar sand developments.

Rhone Resch, president of the Solar Energy Industries Association, said in a statement, welcomed the new package's support for solar, arguing that the sector had the potential to provide a stable and secure energy supply at a time of financial upheaval.

The AWEA also welcomed the Senate's move and urged the House of Representatives to take "swift action" to approve the bill.

"I applaud this critically important effort to move forward on renewable energy tax incentives before Congress leaves town at the end of the month," said Gregory Wetstone, senior director of governmental and public affairs at the AWEA . "We are grateful to Senate leaders from both parties who put aside their differences to come together around this bipartisan package."