Solar Grant: What is a Refundable Renewable Energy Tax Credit?

ITC (Investment Tax Credit) Myopia knows no bounds.
House Committee on Ways and Means passes a renewable Grant Program in lieu of the ITC.

With apologies to Jeopardy!, the above headline is phrased in the quiz show’s answer and question format, and the category must be Solar and Renewable Energy Incentive Policies.

In “SOLAR AND WIND READY TO LEAD NEW CLEAN ENERGY ECONOMY”, the Solar Energy Industries Association (SEIA) and the American Wind Energy Association (AWEA) reiterated their call to make renewable tax incentives refundable. I first blogged about this in ITC Myopia: New Solar Investment Tax Credit Deficiencies Exposed!

A Refundable Tax Credit is defined by Wikipedia as follows:

Refundable or non-wastable tax credits can reduce the tax owed below zero, and result in a net payment to the taxpayer beyond their own payments into the tax system, appearing to be a moderate form of negative income tax.

Refundable tax credits have been directed towards low income families in the United States and have also been proposed for health care premiums (please see “Use of Refundable Tax Credits Has Grown in Recent Years”). Typical practice requires a tax liability to offset tax credits, and tax credits cannot reduce the tax liability below zero nor are they immediately refundable.

Per “Ways and Means Passes Economic Recovery Legislation”:

The House Committee on Ways and Means voted today in support of a comprehensive economic recovery package to provide tax, health and unemployment relief to families while also encouraging businesses to create new jobs.  The legislation, H.R. 598, passed the Committee by a party-line vote of 24 to 13.  The legislation will now be combined with other components of the recovery package from other House Committees into H.R. 1, the “American Recovery and Reinvestment Act” for consideration by the full House of Representatives next week.

The Ways and Means committee was not fooled by the refundable tax credit jargon and has passed a grant program to be administered by the Department of Energy. The grant will be paid within 60 days of application and is equivalent to 30% of the project investment as outlined in the Solar ITC. The energy property needs to be in service by 2010 and applications must be received before October 1, 2011. A dollar cap is not specified although there are many arcane references to the Internal Revenue Code of 1986.

Here is the first paragraph of the relevant section:


(a) IN GENERAL.—Upon application, the Secretary of Energy shall, within 60 days of the application and subject to the requirements of this section, provide a grant to each person who places in service specified energy property during 2009 or 2010 to reimburse such person for a portion of the expense of such facility as provided in subsection (b).

Please see H.R.1 American Recovery and Reinvestment Act of 2009 pp. 330-334 for the full text of the grant program. The U.S. Senate version may or may not include this same provision.

Feed-in Tariff: What is a better way to incentivize solar?

Other acceptable answer clues would have included Standard Offer Contract, Feed-in Rate, or Renewable Energy Payment.

Just this week, “Feeding In Renewable Energy Breakthroughs” by George Sterzinger, Executive Director, Renewable Energy Policy Project, and Nanosolar CEO Martin Roscheisen proposed:

Setting an initial feed-in rate at $0.15 per kilowatt hour for 20 years for solar projects, for example, would draw out multiple breakthrough technologies and greatly advance their market penetration.

The American Recovery and Reinvestment Act of 2009 is a great platform for encouraging adoption of a national Feed-in Tariff (please see Feed-in Tariffs: Solar FiT for the USA). States unwilling to implement the incentive scheme could have been denied funds under certain provisions of the stimulus package starting with the smart grid projects.

And if photovoltaics are good enough for Iraq, “U.S. forces overseeing nearly two dozen solar projects to alleviate Iraq’s electricity crisis” by James Warden for Stars and Stripes, they are just as good for the United States.


  1. Solar Grant: What is a Refundable Renewable Energy Tax Credit? green energy are good additional sources of energy..

  2. Okay, So I’m going to be teaching a class on financies, conservation, and renewable energy to our Master’s Commission students in May and I need the answer to the following question…

    Is the 2009 solar energy credit a refundable credit or normal tax credit?

    The 2008 form 5695 gives you a straight Tax Credit (not refundable and it is wasted) that reduces your Tax Liability on IRS Form 1040 line 53. In 2008, there was $2000 cap in the solar category. You would get the lesser of $2000 or 30%. says that in 2009, the $2000 limit is gone, and now we can get the full 30%, but no-one clearly spels out if this is a tax deduction, a tax credit, or a refundable tax credit. Supposedly the 2009 form 5695 doesn’t come out until late in the year, but I’m hoping someone can tell me if this will be refundable in 2009 or not, so I can budget for my system.

    The installer says I can get $7737 back, but if my tax liability is only $3k, then it will take me three years if it’s not a refundable credit to see all that money, assuming that you can carry it forward in this year’s version of the tax code. Thanks.

    Ground Zero Master’s Commission

  3. I don’t pretend to understand all the ins and outs of this tax credit, but it sounds like a step in the right direction. Hopefully more corporations will take notice.

  4. Jon Welle says:

    2009 solar tax credit is non refundable for home owners, what that means is that you must have a tax liability at the end of the year to take it. We spoke with the woman at the IRS who drafted that part of the code. Essentially you have to stop your witholding so you have a liability at years end otherwise it carries forward to a year when you do have the liability.

  5. Mike Overturf says:

    … a well researched post! You actually have to make a profit in order for the ITC’s to work, a condition which, alas, has been all-too-rare in 2009.

    The simpler alternative, I submit for consideration, would be to lower the cost of solar energy installations. Subsidies create their own markets, and slow the rate of cost decreases as the government money creates a floor below which no one needs to go. I realize that these subsidy tools are intended to break the chicken-egg cycle, but this has been going on for too long.

    The German phenomenon has been instructive. The feed-in tariff cost penalty, is, of course, spread over the consumer population, leading to a kwh unit cost explosion. Still, a 8.4 billion euro expenditure in 2008 has led to a 1.5% total power supply (total share to date), choking wind energy, which is so much cheaper. The drag on the economy is exclusively offset throught increased industrial activity, which the chinese are very busily destroying. What will remain is a giant cost overhang. Feed-in tariffs don’t work unless your buying something in return.

    We should learn from this and focus on cost reductions, instead of arcane and baroque government legislation.

  6. Ken Oatman says:

    Do you know if the commercial solar “grant” has any legislative/lobbyist activity to extend it beyond 2010?

  7. Edgar A. Gunther says:

    Of course, the SEIA is working to get it extended through 2012. At the 3rd Solar Energy Investment & Finance Summit USA this week, a one year extension was also discussed and a transfer from Treasury administration to the IRS.

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