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US solar grant safe - for now

  • Congress will decide on the future of the 1603 grant in two months.
    Congress will decide on the future of the 1603 grant in two months. Image: Matti Mattila.

The future of a key federal solar grant has been temporarily safeguarded under the last-minute fiscal cliff deal reached in the two houses of the US Congress.

The 1603 cash grant, which had been a lifeline to solar developers in the US, is safe for at least two months under a temporary deal on spending cuts reached by Congress on New Year’s Eve.

Under the range of automatic austerity tax increases and spending cuts that would have been activated on January 1 if Congress had failed to broker the deal, the Treasury Section 1603 grant was facing an almost certain 7.6% reduction.

There had been fears that such a reduction could push the likely returns on investment in solar below investors’ minimum acceptable limit, jeopardising project finance.

As it is, the deal means a decision on the spending cuts needed to help the US reduce its debt levels will not be made until March 1.

A spokeswoman for the Solar Energy Industries Association confirmed that the organisation understood the 1603 grant to be safe for at least the next two months.

However, it is possible the grant could still face reductions depending on the outcome of the next round of congressional negotiations.

Matthew Haskins, a Washington-based tax expert at accountants PWC told PV-Tech: "As a practical matter, companies are addressing this issue by working as quickly as possible to file their completed grant applications once their projects are placed into service."

The 1603 grant has played a key role in boosting the US solar industry, with awards to more than 44,000 domestic solar projects leveraging over $7.17 billion in private sector investment in projects as of September 2012, according to the SEIA.

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