BIOMASS HUB

Senator Charles E. Schumer (D-NY) said it made his “blood boil” that a $1.5 billion West Texas wind farm project may get a 30 percent federal tax credit while using turbines made in China.

Senator Schumer, joined by three other Democratic senators, has proposed legislation that would place limitations on the investment tax credit grant in lieu of tax credits for renewable energy projects under section 1603 of the American Reinvestment and Recovery Act. The section 1603 grant currently applies to renewable energy projects, such as wind, solar, geothermal, and biomass, that are placed in service before 2011 or for which construction begins in 2009 or 2010.

In its current form, if a project qualifies, the Treasury Department is required to pay the grant.  Senator Schumer’s proposal would make payment of the grant subject to the discretion of the Treasury Department.  It also would make the grant subject to the Buy American requirements of the stimulus bill, and would require that Treasury conduct an analysis of the “domestic job preservation and creation provided by” a project with respect to which a grant application is submitted.

The existing tax credit is a key lifeline to the emerging renewable energy industry, which requires significant capital and time to build out specific projects.  Senator Schumer and the other sponsors are upset that a significant portion of the grants paid so far have gone to non-U.S. companies, citing a supposed dependence on foreign-made equipment as evidence that the program is not sound policy and should be limited to projects using American-made equipment and producing jobs in America.

But the Recovery Act already has a Buy American provision (section 1605(a) of the Recovery Act), which directs that, subject to certain exceptions, no funds appropriated or otherwise made available for a project may be used for the construction, alteration or repair of a public building or public work unless all the iron, steel, and manufactured goods used are produced in the United States.  The law also provides for three exceptions to the Buy American restriction where:

• Iron, steel or manufactured goods are not produced in the United States in sufficient and reasonably available quantities and of satisfactory quality;
• Inclusion of iron, steel or manufactured goods produced in the United States will increase the cost of the project by more than 25 percent;
• Applying the Buy American restriction is inconsistent with the public interest.

The Obama Administration strongly supports section 1603 and has already come out in opposition to the proposal. All of the various trade associations involved in renewable energy (such as AWEA, GEA and SEIA) are organizing against the proposed legislation, arguing against the assumption that the ITC does not create U.S. jobs.

Co-sponsoring the bill with Senator Schumer are Senators Robert P. Casey Jr. (D-PA), Sherrod Brown (D-OH), and Jon Tester (D-MT).