Solar tax credit in danger of expiring

Dec 20 - The Santa Fe New Mexican

Among many federal tax incentives set to expire at the end of the year absent action by Congress is one that helps small businesses and big power companies, including ones in New Mexico, pay for renewable energy systems.

If the Section 1603 treasury grant program is allowed to expire Dec. 31, it will slow solar installations and hurt local companies, said Randy Sadewic, president of the New Mexico Renewable Energy Association. "Small businesses opt for [this program] because it means they don't have to come up with all of the money up front for installation and then wait to get some of the money back on their tax return," Sadewic said. "It's another way of making solar more accessible, especially for businesses."

Public Service Co. of New Mexico also supports the program and wants Congress to approve an extension of the federal Section 1603 solar grant program. "The impact of the grant is to lower the cost of more expensive renewable energy resources for our customers," said PNM spokeswoman Susan Sponar.

Other tax programs, like a federal investment tax credit, also help businesses lower the cost of installing solar energy systems. But the 1603 grant program provides cash back to companies a little more quickly.

Sponar said companies can apply for the program to receive a 30 percent tax grant for "the power generation component of the costs of a renewable generation project." Construction has to begin before the end of this year. PNM is applying for the grant to offset the costs of the 22 megawatts of solar power generation the company built this year. Since PNM is permitted to charge a fee to customers to recoup the cost of installing these solar energy systems, the grant will reduce the amount the company seeks from customers.

For other businesses that want to install solar, here's how Sadewic explained the process.

Say a business has $100,000 to spend on installing a solar power system. The business has estimated it will get $30,000 back for the project through a tax credit. The installer does the work and accepts $70,000 for the system with a balance due of $30,000. The business applies for the grant and, when the check comes, pays the installer the balance.

Subsequently, the business won't claim a tax credit on its tax return forms the next year.

The grants provide another way for businesses to invest in renewable energy and helps provide work for local installers, Sadewic said.

Section 1603 is among several energy-related tax measures Congress is considering as time runs out before the end of the year. U.S. Sen. Jeff Bingaman, D-N.M., "is certainly hoping the final package includes 1603," said a Bingaman staffer. "Whether Congress will be able to pass it before the holiday recess is unclear."

Despite the still struggling economy, there was a steady increase from 2009 to the most recent quarter in residential, business and utility solar photovoltaic installations, according to GreenTech Media. PV capacity doubled in 2010 across the U.S., and in New Mexico, compared with the prior year, according to the latest report from the Interstate Renewable Energy Council.

Contact Staci Matlock at 986-3055 or smatlock@sfnewmexican.com.

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