Renewable Energy: Financing Mechanisms and Incentives

From both political parties and even outside of Washington, there is still a long-term trend of support for renewable energy to remain part of the energy policy of the United States.

Dollar_Sign_PlugWhile much attention has rightly been given to the expiration of the Section 1603 cash grant program at the end of 2011, there are other tax incentives for renewable energy that are also set to expire in the upcoming years. The decisions as to whether to renew these incentives will have a major impact on the future of renewable energy in the U.S. as these existing and new programs have been instrumental in sustaining investor and lender interest in the renewable energy sector, particularly in the wind and solar markets.

In the past, there had generally been bi-partisan consensus in support of incentives for renewable energy. The tone was more one of compromise and in favor of doing what was in the country’s best interests without regard to political affiliation. Along those lines, incentives for renewable energy were seen as both economically and environmentally beneficial for the country.

However, since 2010, there has been a shift in tone towards the renewable energy market due, in part, to the upcoming presidential election. In addition, the failure of several solar industry manufacturers in 2011 who had U.S. Department of Energy loans or loan guarantees — most notably, the federal government’s loss of $535 million in connection with the bankruptcy of California-based Solyndra — has given renewable industry opponents the political cover to reject further funding or other potential governmental programs. What was once a policy topic where decisions were made based solely on the good of the country has now become a topic that is more politically charged and therefore not as open to compromise or new policymaking.

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Source: Allan Marks, Milbank, Tweed, Hadley & McCloy LLP | RenewableEnergyWorld.com