On March 15, members of the House Energy and Commerce Committee sent letters to the Treasury and Energy departments requesting information on the number of energy jobs created by a tax grant program authorized by Section 1603 of the American Recovery and Reinvestment Act. The letters received no response, leading House Speaker John Boehner to say on March 29 that “More than $10 billion – that’s with a ‘b’ – $10 billion has been spent on this, and [Energy] Secretary Chu said it created ‘tens of thousands of jobs,’ except there’s no evidence to support that.” (The Hill)
An NREL report released at the beginning of April suggests that the Act’s support of renewable energy projects, and the Section 1603 tax grant program specifically, did create employment. While federal funding amounted to around $9 billion, the NREL report states that the Section 1603 program resulted in $26 to $44 billion in total economic output over the past three years, supporting 23,000 energy projects and leading to between 52,000 and 75,000 jobs. Many of these jobs were in manufacturing and the supply chains associated with renewable energy projects. The projects added 13.5 GW of renewable energy capacity, according to the report.
The Section 1603 tax grant program offered energy project developers an upfront, one-time cash payment in lieu of taking the Investment Tax Credit (ITC) or the Production Tax Credit (PTC)— an attractive option in a recession, when third-party investment in energy projects is limited. According to the NREL report, the program brought billions in private capital to the table.
When are subsidies for energy projects and technologies warranted? What factors should be used to evaluate the effectiveness of subsidies? Should the Section 1603 program be extended?