The 1603 Program, “Renewable Energy Grant,” offering renewable energy project developers cash payments in lieu of the investment tax credits, enacted on January 1, 2009, will expire on December 31, 2011. Coming out of The American Recovery and Reinvestment Act of 2009 (“ARRA”), the program offered U.S. taxpayers cash grants up to 30% of the project’s total eligible cost for property placed in service in 2009, 2010 or 2011 or placed in service by the specified credit termination date, if construction began in 2009, 2010 or 2011.
The strength of 1603 was the guarantee by U.S. Treasury Department to make payment within 60 days of the grant application date or the date the property is placed in service, whichever is later. Qualifying renewable energy technologies include: biomass, combined heat and power, fuel cells, geothermal, incremental hydropower, landfill gas, marine hydrokinetic, microturbine, municipal solid waste, solar, and wind. These upfront cash payments bolstered tax equity financing and drove the renewable energy industry, and in particular solar and wind projects, to experience strong growth in recent years.
So what has 1603 wrought? As of June 16th, 2011, the U.S. Treasury reported the status of the 1603 Program:
• Total number of projects funded = 15,125
• Total 1603 funding = $7.7 billion
• Total private and federal investment in 1603 projects = $26.0 billion
• Total installed capacity of funded projects = 11.6 GW
• Total estimated electricity generation from funded projects = 30,400 GWh.
By project type:
• 96% (14,595) of all funded projects were Solar, see Figure 1
• 79% ($6.1 billion) of all funds were allocated to Wind projects, see Figure 2
• 89% (10.3 GW) of all generation capacity came from Wind projects, see Figure 3
• 87% (26,395 GWh) of electrical generation came from Wind projects see Figure 4.
Source: U.S. Treasury Department, “Overview and Statues Update of 1603 Program.”
As of August 12, 2011, the U.S. Government (Recovery.gov, “Track the Money”) reported $900 billion has been paid out and awarded under the ARRA. Respectfully, Section 1603 accounted for less than 1% of all ARRA funds. Another way to look at this expenditure is that the U.S. taxpayers spent $0.67 per Watt of installed electrical generation capacity on 1603.
Considering renewable energy as a key element towards achieving energy and national security, $0.67 per Watt is a bargain in comparison to the cost of the Iraq and Afghanistan War which on the same basis has cost the American Taxpayer $103 per Watt.
The capital cost for solar and wind electrical generation plants are north of $2.50 per Watt. Though the costs are steadily declining they cannot compare to conventional gas-fired plants which cost south of $1.00 per Watt. The following Table from the EIA shows, November 2010, summarizes the cost estimates for the generic utility-scale generation plants, including 7 powered by coal, 6 by natural gas, 3 by solar energy, 2 each by wind, hydro, biomass, and geothermal power, and 1 each by uranium and municipal solid waste.
Capital Cost Estimates for Electricity Generation Plants
In closing, with a deadlocked myopic government ruled by self- and special-interests looking to save “easy” pennies, it appears 1603 is destined to the trash heap of promising programs killed at the cost of America’s future and security. In this time of severe economic turmoil, can wisdom and national interests prevail on Capitol Hill to stop the dreaded 10-count?
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