December 13, 2007 10:43 AM PST

Energy bill expected to lose renewable energy tax break

Posted by Martin LaMonica

Dealing a blow to the solar and wind industries, the U.S. Senate is expected to pass an energy bill later on Thursday that strips out a tax provision to encourage investment in renewable energies.

The House last week passed an energy bill that extended tax incentives beyond 2008 for businesses and consumers who purchase renewable energy systems.

On Thursday, the Senate delayed passage of the bill until later today, a move which will lead to the removal of the tax provision, according to industry executives and published reports.

The centerpiece of the energy bill is an overhaul to the fuel-efficiency standards for vehicles.

The House version included an extension to the incentive tax credit and a provision that would require utilities to have 15 percent of their power come from renewable sources. Both are expected to be stripped.

Not surprisingly, executives from the solar and wind industries criticized the result of Thursday morning's Senate vote.

"Today's vote is out of step with Americans across the political spectrum who overwhelmingly support clean, home-grown renewable energy," said Gregory Wetstone, the senior director of governmental and public affairs at the American Wind Energy Association, in a statement.

The tax incentives would have extended a 30 percent tax credit on renewable energy investments. The Solar Energy Industry Association lobbied for lifting the existing $2,000 cap on that the federal tax credit for residential installations.

The credit will continue through 2008, but the solar and wind industries need a multi-year tax regime in order to ensure continued investment, particularly for large-scale projects which take years to build, according to industry executives.

"When you start construction of power plants, anything of this size is a three-year project so you need to know what the federal policy is four years out," said John O'Donnell, executive vice president of Ausra, a solar power plant company. "You only get to claim the credit the day the project goes online."

Changes in the incentive tax credit can mean a 20 percent change in the price of projects and increased risk for financiers, O'Donnell said.

Without a multi-year tax program, the solar industry will be delayed, he said.

Extending or raising the tax credits on renewable energy faced opposition because it would have been paid by new taxes, mostly on the oil industry, according to industry executives and published reports.

President Bush also threatened to veto the energy bill that the House had passed.