Solar stimulus faces a setting sun

A major federal grant program to keep renewable energy projects underway during the economic downturn might end too quickly to help some planned solar power plants unless Congress extends it.

In a note Thursday, FBR Capital Markets predicts that several large projects will face a crunch to begin construction this year to take advantage of a program in the 2009 stimulus law.

The stimulus allows renewable project developers to access federal grants, covering 30 percent of their costs, in lieu of traditional tax credit financing, which dried up during the downturn.

The tax credits became useless because financiers lacked profits – and hence tax liabilities – to use the credits against, and some banks that backed renewable projects were in crisis or collapsed (including Lehman Brothers).

“Permitting delays limit the projects that can commence this year. The deadlines are a cause for concern for solar manufacturers because of delays in siting and permitting for large-scale solar projects and transmission, especially on federal land,” FBR’s note states.

But FBR believes that extension will be an “uphill battle.”

“The solar industry has asked Congress to extend the construction date beyond 2010 to allow projects that will not begin construction by the deadline to receive the grants. However, the Obama administration is reluctant to extend the deadline, which is intended to stimulate jobs in the near term,” they say.

FBR estimates that 2 gigawatts of U.S. solar installations are slated for next year, but that some companies planning projects will face a challenge to gain financing in what remains a tough environment if the deadline isn’t extended.

The Interior Department – which plays a big role because a suite of projects are planned on sunny federal lands – knows the clock is ticking. It has “fast tracked” review of 14 solar power plants, mostly in California and Nevada, to help them meet the deadline. Interior is also speeding up reviews of some wind, geothermal and transmission projects as the deadline looms.