A group of U.S. Senators Tuesday proposed extending a government program that provides cash grants to renewable energy developers in lieu of tax credits, a program developers have said is crucial to keeping the market afloat.

Sens. Maria Cantwell (D., Wash.), Dianne Feinstein (D., Calif.) and four other Democratic senators proposed extending the renewable tax-credit Treasury grant program another two years, through 2012, as part of a $140 billion bill to extend federal unemployment aid and renew a host of expired tax breaks.

The renewable energy proposal, in the form of an amendment to the "tax extender" bill, would create at least 65,000 jobs in the solar power industry and tens of thousands of jobs in other sectors, Cantwell and Feinstein said.

"The clean energy sector is the next frontier in jobs creation, so we need to ensure that developers can access financing to launch wind, solar and geothermal projects and put people to work," Feinstein said in a statement.

The senators said the bipartisan proposal would carry a minimal cost and help "jumpstart" a transition in the U.S. to cleaner forms of energy.

The renewable-energy grant program, created by the 2008 Recovery Act, has been widely credited with keeping the U.S. renewable-energy market solvent after the financial crisis wiped out most sources of project financing on which developers had depended.

Other Recovery Act programs, like expanding the Department of Energy's loan guarantee program, also have boosted renewable energy development. But developers and power generators have said the cash grant program is the most vital, and extending it past 2010 is key to ensuring that new wind and solar farms will continue to be built across the U.S.

The program, in which the Treasury Department provides grants to renewable energy developers for the amount that they would otherwise get under a federal 30% investment tax credit, frees developers from having to find a "tax equity" partner to take advantage of the credit. Before the financial crisis in 2008, Wall Street banks routinely provided tax equity financing for renewable energy projects, but those sources dried up after the market meltdown.

Extending the grant program will prevent a slowdown in U.S. renewable energy development, said the proposal's sponsors, who include Sens. George LeMieux (R., Fla.), Debbie Stabenow (D., Mich.), Jeff Merkley (D., Ore.) and Ben Nelson (D., Neb.).

The amendment also would allow municipal utilities and other non-profit power producers that don't pay taxes to take advantage of the program for the first time.

If the proposal succeeds, it would benefit manufacturers of solar panels, wind turbines and other renewable energy components, such as First Solar Inc. (FSLR), SunPower Corp. (SPWRA, SPWRB), Suntech Power Holdings Co. Inc. (STP), General Electric Co. (GE) and Vestas Wind Systems AS (VWS.KO), as well as renewable energy developers such as NextEra Energy Inc. (FPL), Iberdrola Renovables SA (IBR.MC) and E.On AG (EOAN.XE).

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