The Treasury Department has posted new information on sequestration cuts to the 1603 grant program for renewable energy projects.
In a letter posted yesterday, Treasury says that grants issued between March 1, 2013 and September 30, 2013 will be cut 8.7 percent. Here's the full text of the letter:
As the Administration has stated many times, sequestration would require indiscriminate across-the-board cuts and was never intended to be implemented. The Administration has proposed solutions to avoid the across-the-board spending cuts through balanced deficit reduction. The Department of the Treasury, along with the rest of the Administration, hopes Congress will act to avoid sequestration. Pursuant to the requirements of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, payments issued under Section 1603 of the American Recovery and Reinvestment Tax Act of 2009 for specified energy property in lieu of tax credits, are subject to sequestration. This means that every award* made to a Section 1603 applicant on or after March 1, 2013 through September 30, 2013 will be reduced by 8.7 percent, irrespective of when the application was received by Treasury. Awards made prior to March 1, 2013 will not be affected. The sequestration reduction rate will be applied until the end of the fiscal year (September 30, 2013), at which time the sequestration rate is subject to change.
Treasury will continue to review applications and make determinations in accordance with current practice. Applicants are reminded that the amount of their Section 1603 claim must be calculated in accordance with the Section 1603 Program Guidance and the laws applicable to calculating basis for federal tax purposes. Applicants may not adjust claims to account for the impact of sequestration.
*In this context “award” means the final decision by Treasury to pay a claim as evidenced by the “Section 1603 Award Letter” and effective the date of the letter.
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It is still unclear how many projects that haven't been completed will be affected by the change.
Renewable energy consultant Barry Cinnamon had this to say to Greentech Media on the topic: "This will probably be a 2.6 percent cut (8.7 percent off 30 percent) on cash receipts in lieu of the ITC received for all projects covered during these dates. The cash payments will be reduced, but the entity that is affected will depend on contract language. Since it is effectively retroactive to projects that were already installed, it should not have any immediate impact on industry growth rates, except to the extent that there will be some unhappy solar investors."
The 1603 grant program was created under the stimulus package to help developers finance projects after the economic collapse. According to a DOE analysis, the grant program supported 13,000 megawatts of wind and solar projects while stimulating more than $25 billion in activity.