Section 1603 Treasury Grant Expiration: Industry Insight on Financing and Market Implications

Michael Mendelsohn

Research output: NRELTechnical Report


In the wake of the 2008-2009 financial crises, tax equity investors largely withdrew from the market, resulting in stagnation of project development. In response, Congress established the Treasury grant program pursuant to Section 1603 of the American Recovery and Reinvestment Act (..Section..1603 Program) to offer a cash payment in lieu of a production and investment tax credit. This studyaddresses the likely project financing and market impacts from the expiration of the ..Section..1603 Program. The authors assembled an array of insights offered by financial executives active in the renewable energy (RE) market during conference panel discussions and in presentations, direct interviews, and email correspondences. This analysis found that the ..Section..1603 Program alleviatedthe need to monetize the tax credit incentives through specialized investors, helped lower the transaction and financing costs associated with renewable electricity projects, and generally supported an extensive build-out of renewable power generation capacity. With the expiration of the ..Section..1603 Program, smaller or less-established renewable power developers will have more difficultyattracting needed financial capital and completing their projects, development of projects relying on newer or 'innovative' technologies will likely slow as traditional tax equity investors are known to be highly averse to technology risk in the projects they fund, and, finally, projects relying on tax equity may be more expensive to develop due to higher transaction costs and potentially higheryields required to attract tax equity.
Original languageAmerican English
Number of pages41
StatePublished - 2012

NREL Publication Number

  • NREL/TP-6A20-53720


  • financing renewable energy projects
  • investment tax credit (ITC)
  • renewable energy investments
  • Section 1603 program
  • tax equity investors
  • Treasury grants


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