The Renewable Energy Grant Program: A Primer

By: Kaylyn Boca, Esq.

Section 1603 of the American Recovery and Reinvestment Tax Act of 2009 (also known as the Renewable Energy Grant Program) provides for governmental payments to individuals who invest in the development of renewable energy property. The Program has been an asset to the recovery of the American economy while decreasing American dependence on non-renewable energy sources. Since its onset, the Renewable Energy Grant Program (“REG”) has helped fund almost 8,000 projects that have generated an estimated 27.5 TWh of electricity (1).

The idea of subsidizing the development of renewable energy projects originally started as a dollar-for-dollar tax credit for investors under §45 and §48 of the Internal Revenue Code. The economic downturn, however, drove many investors away from investing in renewable energy projects. To reinvigorate investment, Congress amended the original renewable energy tax credit program through §1603 so that the Treasury could make payments, in the form of grants, to persons that placed into service specific energy property during 2009, 2010, 2011, or after 2011 if construction began during 2009, 2010, or 2011. In general, the payments are equal to 10% or 30% of the basis of the property, and continue through 2013 or 2017, depending on the type of property. The types of property that qualify for the payments include wind turbines, biomass facilities, geothermal facilities, and solar facilities among many others.

While achieving the goal of temporarily filling the gap created by the diminished number of investors for tax credits, many jobs have also been created and retained through implementation of the REG, and the use of clean and renewable energy has expanded. The number of funded projects has amounted to over $23 billion in investment, these are concentrated primarily in wind and solar energy projects with solar energy projects having more starts (2). Surprisingly, despite the high number of solar project starts, the total energy capacity of wind projects dwarfs that of any other renewable energy project (3). Pennsylvania ranks in the top 15% of the states in total funding from the REG, number of projects, and installed energy capacity (4).

Despite the success of the REG, there  is potential concern over the deadline to take advantage of the program (5).  Because the projects need to have been commenced prior to the end of 2011, there is a short window of opportunity for developers to take advantage of the §1603 payments.

Kaylyn Boca practices in Leech Tishman’s Corporate and Real Estate Practice Groups. Kaylyn can be reached at 412.261.1600 x 215 or kboca@leechtishman.com. Recognition is extended to Justin Stark, a Summer Associate with Leech Tishman, for his assistance and research in preparing this article. Please feel free to contact Kaylyn with any questions you may have on this article. For more information on Leech Tishman’s Energy Practice Group, please click here.

Leech Tishman is a firm dedicated to providing full-service commercial legal services to individuals, businesses, and institutions. We combine a deep understanding of our clients’ and their businesses with skilled legal counsel to find solutions. We offer legal services in alternative dispute resolution, bankruptcy & creditors’ rights, construction, corporate, employment, energy, environmental, safety & toxic torts, estates & trusts, government relations, insurance coverage & corporate risk mitigation, litigation, real estate, and taxation. For more information call 412.261.1600 or visit www.leechtishman.com.

(1) Overview and Status Update of the §1603 Program, as of April 6th, 2011.
(2) Id.
(3) Id.
(4) Id.
(5) Preliminary Evaluation of the Impact of the Section 1603 Treasury Grant Program on Renewable Energy Deployment in 2009. Mark Bolinger, Ryan Wiser, and Naim Darghouth. Ernest Orlando Lawrence Berkeley National Laboratory. April 2010.