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• DECEMBER 15, 2010, 2:54 P.M. ET

US Senate Approves Key Renewable Energy Tax Incentives

By Cassandra Sweet

Of DOW JONES NEWSWIRES

The U.S. Senate on Wednesday approved a tax bill that, among other things, extends for another year key tax incentives for the renewable power and ethanol industries.

The $858 billion bill, which extends Bush-era tax cuts for two years, moves next to the House of Representatives.

U.S. wind, solar and other renewable energy industries have pressed lawmakers to continue a program that allows solar and wind power facilities to obtain federal grants equal to a tax credit worth 30% of the cost of building a new facility. The program was established in the 2009 economic stimulus package to rescue the U.S. renewable energy market from near collapse, after lenders that had previously provided financing in return for developers' tax credits abandoned the sector amid the financial crisis.

Developers have warned that U.S. renewable energy development will slow down, with massive layoffs to follow, if the tax grant program isn't extended, owing to continued weakness in the U.S. power market, the slow pace of the economic recovery and a still difficult financing environment.

The Solar Energy Industries Association hailed the Senate's passage of the tax bill, saying the grant program has created jobs in all 50 U.S. states for construction workers, electricians, plumbers and other tradespeople.

"An extension will help the solar industry remain one of the fastest growing industries in America and create thousands of new careers," the solar industry group said in a statement. "With passage now complete in the Senate, it is critical that the House moves swiftly to pass this bill and send to the President for his signature. Tens of thousands of jobs depend on it."

The tax bill also includes a one-year extension of a tax credit for the ethanol industry. The program provides a 45-cent subsidy for every gallon of ethanol blended into gasoline.

While the ethanol industry hailed the inclusion, Sen. Dianne Feinstein (D., Calif.) and a coalition of food industry, animal agricultural industry and environmental groups criticized the ethanol tax-credit extension, saying it wasn't necessary for an industry that enjoys other kinds of government support.

"The ethanol industry is the only one to ever receive the triple crown of government intervention," Feinstein said in a statement following the Senate's passage of the tax bill. "Ethanol use is mandated by law, its users receive federal subsidizes and domestic production is protected by tariffs. That policy is not sustainable."

Feinstein had made a last-minute push to lower the value of the ethanol credit by 20%. The extension still needs to win approval in the House of Representatives.

The tax bill also would cut payroll taxes for workers in 2011, extends jobless benefits for 13 months and extend a range of expired business tax breaks.

-By Cassandra Sweet, Dow Jones Newswires; 415-439-6468; cassandra.sweet@dowjones.com

--Tennille Tracy, Corey Boles, Martin Vaughan and Siobhan Hughes contributed to this article.