Spanish owned Abengoa Solar would suspend its plans to build a concentrating solar-thermal plant and a mirror manufacturing plant in the United States if the federal government doesn't extend a package of investment tax credits for eight years, a company official said Monday.

The company has been working on a 280-megawatt solar thermal power plant in Arizona that would use a field of mirrors to direct the sun's heat for generating electricity.

Abengoa is also looking at building a factory to make mirrors. But the company is banking on the passage of investment tax incentives that would help offset the cost of the projects.

The trouble is, Congress has tried several times – and failed – to extend the incentive package, which is scheduled to sunset at the end of the year. Republicans and Democrats haven't been able to agree on heady issues such as how to pay for them.

A new legislation for passing the tax credits is alive. The Senate will soon consider whether to take on a set of incentives already passed by the House.

"It’s not us. We want to do the project," said Fred Morse, senior advisor of U.S. operations for Abengoa Solar, Monday at Intersolar North America during a Greentech Media seminar. "But the bank will say that it's not financeable" without the tax credit, which would foot 30 percent of the solar-thermal plant cost. Abengoa hasn't disclosed the cost of both projects.

The package of investment and production credits would not only benefit solar companies and their investors, but also help other types of renewable energy companies such as wind and geothermal (see Senate Blocks Renewable Incentives Bill, Solar Industry’s Five-Step Plan, Solar Sharpens Weapons for Incentive Battle and Senate Rejects Green Incentives to Pass Energy Bill).

The tax credits only apply when the plant comes online. Yet a solar-thermal project would take four to six years from start to when it comes online, Morse said.

In February, Abengoa Solar announced it would build the 280-megawatt solar-thermal plant and sell the electricity to utility Arizona Public Service.

The company has yet to decide the location of the mirror factory.

Concentrating solar-thermal power systems use different types of mirror configurations to concentrate the sun’s heat, collect it and convert it into electricity with the aid of a generator.

Abengoa Solar is currently seeking regulatory permits before it can start construction on the plant, to be located 70 miles southwest of Phoenix.

The company also needs the approval of the Arizona Corporation Commission to sell the electricity produced by the plant to the Arizona Public Service, Morse said.

For now: "We're moving along under the assumption that the (investment tax credit) gets extended," he said.

If Congress doesn't pass the multiyear tax incentive package before the end of this year, it may allow for a one-year extension instead and let the next Congress make what has been a difficult decision.

In a recent Q&A with Greentech Media, Morse said a one-year extension offers no value to companies such as Abengoa Solar.

There are about 400 megawatts of concentrating solar thermal installed in the United States, with about 4,300 megawatts of projects under development, said Morse, who is also chairman of the concentrating solar power division of the Solar Energy Industries Association.

Not everyone shares Morse's view about the one-year extension of the investment tax credits.

Hal LaFlash, director of emerging clean technology policy for California utility Pacific Gas & Electric, said the extension could help companies persuade investors to keep projects on track. Many investors and companies also believe that the next president, regardless of whether he's a republican or a democrat, would sign the multiyear tax credits into law.

PG&E is counting on solar companies to build enough power plants so that it can meet a state law that requires PG&E and other state utilities to get 20 percent of energy from renewable sources by 2010.

During the last three years, PG&E has been bulking up on its renewable energy portfolio with solar energy, including solar-thermal deals.

In June, the utility entered into an agreement with San Joaquin Solar to buy power from a hybrid project that will combine solar-thermal and biofuel technology to make electricity 24 hours a day (see PG&E to Get Power from Solar-Biofuel Hybrid Project). In April, the utility signed a deal that it would get up to 900 megawatts of solar thermal energy from BrightSource. In November it signed a 177-megawatt agreement with Ausra (see Ausra to Build 177-Megawatt Solar-Thermal Plant, Ausra Raises $40M for Concentrating Solar-Thermal and FPL and PG&E Back Solar-Thermal).

Of course, the investment tax credits alone won't ensure the success of these projects. Other challenges include building more transmission lines to ferry electricity from power plants in remote areas to the customers.

To get a sense of how hard it is for a company to go from signing a contract with PG&E to actually completing the project, LaFlash pointed to a California Energy Commission study that showed 12 percent of the renewable energy contracts signed by public-owned utilities were canceled between 2002 and 2007. Another 20 percent were delayed.