Yesterday, Vice President Joe Biden joined a growing number of voices in calling for Congress to extend the Treasury cash grant program. This show of support from the Obama administration is timely and reflects the recognition that some stimulus programs should last into the future. CAP’s Richard W. Caperton has the story.
The Treasury cash grant program, also called “Section 1603”, provides a cash grant to a renewable energy developer in lieu of a tax credit. Historically, project developers have earned a tax credit based on the size of their investment in renewable energy. These developers rarely have profits and don’t owe any taxes, so they would sell the credits to a “tax equity partner”. In the recent financial crisis, these tax equity partners – typically large financial institutions – disappeared, and developers were left holding tax credits they couldn’t use.
The American Recovery and Reinvestment Act (the “stimulus bill”) fixed this problem by offering developers the ability to either claim the tax credit or receive a cash grant for the same amount as the credit. Not surprisingly, this has been hugely popular, and Treasury has disbursed more than $5 billion in grants since the program began.
In calling for the program’s extension, Biden described its effectiveness, saying, “This program was created by the Recovery Act and has been hugely successful, leading to nearly 4,000 new clean energy projects over the past two years here in the United States.”
A recent report from Biden also detailed the Section 1603 program’s role in job creation. According to “The Recovery Act: Transforming the American Economy through Innovation,” the cash grant program is directly responsible for creating 12,000 new jobs. Reports from the American Wind Energy Association, which also counts indirect job creation in sectors like manufacturing, estimate that the program has created or saved 40,000 jobs.
The Center for American Progress has written about this program several times over the last year. In these other pieces, we’ve described more details about how the program works (“Generating Clean Energy Jobs”), why cash grants are preferable to tax credits (“America’s Hidden Power Bill”), and how effective the program has been (“The entire American economy, including renewable energy, benefited from the stimulus bill”).
Biden’s remarks came at a meeting of the Middle Class Task Force. In addition to endorsing the cash grants, he also called for several new important energy efficiency initiatives.
— Richard W. Caperton is a Policy Analyst with CAP’s Energy Opportunity team.