Today, the U.S. House Ways & Means Committee approved billion in energy tax credits and related financial incentives as part of the Obama administration’s plan to revive the American economy. Of the $20 billion that has been approved, more than $13 billion of it is focused on renewable energy projects.

The U.S. House of Representatives is also considering making the credits refundable. Instead of saving money on taxes, renewable energy investors would get a direct payment equivalent to the tax credit through a grant program at the Department of Energy.

The key here is that the refundable tax credits would be a big part of the answer to the problem of financing and launching capital-intensive projects in a credit crunch. Firms that had shelved renewable energy projects will now be able to look at them again, because if a company has no tax liability, the government would simply write the firm a check for the amount of the tax credit. One advantage of making the credits refundable is that it would not require a new appropriation.

The tax breaks will benefit the wind and solar energy industries and encourage energy-efficiency improvements to existing homes such as photovoltaic solar panels and solar hot water systems. Other facilities that generate electricity from renewable sources such as biomass, hydropower, landfill gas and ocean currents also qualify for the credit. Facilities will have to be in place by 2012 to be eligible for the credit.

Homeowners can get a tax credit of up to 30-percent on upgrades for energy-efficient furnaces, hot water boilers and other energy savings improvements.

If gas stations install pumps that dispense alternative fuels like hydrogen, natural gas and gasoline made from 85 percent ethanol then they will also qualify for tax breaks.

The new tax credits would put in place the kind of long-term incentives for renewable energy that the industry has been seeking for many years  and will achieve what the piecemeal extensions of the production and investment tax credits never could.

Image is of the United States Capitol Building by Rob Crawley on flickr under the Creative Commons license