Section 1603 of the American Reinvestment and Recovery Act (Recovery Act or "stimulus") created a grant program administered by the Department of Treasury (Treasury) and the Department of Energy (DOE). This program offered cash payments to renewable energy projects, mainly solar and wind. Before the stimulus, qualifying renewable energy projects were Federally supported, primarily through the production tax credit or investment tax credit. Through March 15, 2012, $8.2 billion (74.7 percent) of the total amount in Section 1603 grants awarded was for wind and another $2.0 billion (17.4 percent) was for solar electricity. The remaining 8 percent went to technologies such as geothermal electricity, biomass, solar thermal, and small wind.
The Recovery Act was touted by President Obama as a jobs program. Separately, DOE Secretary Steven Chu, in testimony before a joint subcommittees of the Committee on Energy and Commerce (Committee) on March 16, 2011, stated that "the Section 1603 tax grant program has created tens of thousands of jobs in industries such as wind and solar by providing up-front incentives to thousands of projects."
An investigation by the Subcommittee on Oversight and Investigations shows that:
o Most current methods used to calculate jobs created by Section 1603 are largely unreliable. What accurate jobs data that exists for Section 1603 shows that it produces very few long-term jobs.
o The Section 1603 program has resulted in higher costs to the taxpayer than previously anticipated.
Section 1603's Faulty Jobs Record
Despite statements made by the Administration that the Recovery Act, and Section 1603 in particular, would create jobs, information gathered by the Committee shows that job creation is an afterthought of the Section 1603 program.
The Committee requested that DOE and Treasury report on the number of jobs created by Section 1603:
o Treasury stated that it does not consider job creation when awarding the Section 1603 payments: "...job creation is not one of the statutory requirements for eligibility and thus it is not a factor in the consideration process. Because the 1603 program's primary focus is on domestic renewable energy production, Treasury also does not report on the number of jobs created by the program."
o DOE echoed Treasury, but also referenced estimates contained in a National Renewable Energy Laboratory (NREL) report. The operation and maintenance of photovoltaic and wind energy systems, in which around $8 billion of Section 1603 funds were invested, were estimated to support just over 5,000 direct and indirect jobs per year over the lifetime of the systems. Removing indirect jobs, the estimate falls to "910 annually for the lifetime of the systems," alarmingly low figures consistent with those reported by the Wall Street Journal in February 2012.
The NREL estimates relied upon by DOE include projects that even NREL admits might have progressed without the Section 1603 award. In fact, NREL acknowledged that "the results presented in this report cannot be attributed to the Section 1603 grant program alone." Further, a New York Times article and Lawrence Berkeley National Laboratory report from 2010 confirmed that Section 1603 funds went toward many projects that were already underway.
Besides overstating the number of jobs created by Section 1603 grants, NREL's models do not account for displaced jobs, economic activity related to changes in utilization of existing power plants, electric utility revenues, and household and business energy expenditures. The NREL study does not estimate job creation and economic impacts associated with possible alternative spending of Federal funds.
The job creation numbers that exist for Section 1603 are based on models, not actual data from completed projects. Neither Treasury nor DOE have turned over actual jobs data on the Section 1603 grants program to the Committee.
The Cost of Section 1603 to the Taxpayer
Over $11 billion in Federal grants have gone out the door and at least another $11 billion are yet to be paid out, according to government estimates.
Outlays from extending the program, under the President's FY 2013 budget proposal, would add another $4.7 billion in outlays over 2012-2022. According to the Congressional Research Service and the Joint Committee on Taxation, the Section 1603 program has resulted in revenue losses that are significantly greater than the revenue losses associated with the previously available tax incentives.