Last night the Senator Harry Reid introduced a bill designed to extend the Bush-era tax cuts—the ones that Washington has been abuzz about all week. The bill (pdf) is in line with a deal that President Obama made with Republicans, which would extend the tax credits to the wealthy, as well as the middle class, in exchange for a package of incentives that Democrats want, including a payroll tax reduction and an extension of unemployment insurance benefits. It also includes something the original deal didn't have—an extension of a popular grant program for solar, wind, and other renewable energy projects.

The program, established under section 1603 of the Recovery Act of 2009—and often referred to as the 1603 grant program—gives grants instead of tax credits that had been previously authorized to renewable energy project developers, which makes it much easier to get financing. The program had required construction to start on renewable energy projects by the end of this year—a deadline that came too soon for many projects mired in lengthy approval processes. Without the new extension of the grant, financing for renewable energy projects would be cut in half, according to one estimate (pdf).

The bill also extends almost a dozen energy-related incentives programs, including production credits for biodiesel, tax credits for energy efficient home manufacturers, and ethanol subsidies.

When the Senate comes back from its summer recess on September 11th, the energy bill that was dropped before vacation will still be dead in the water.

In a conference call today Senate Majority Leader Harry Reid (D-NV) said he and other senators will continue to modify the bill in an attempt to win votes. This may include adding a standard that would require States to use a minimum amount of renewable energy. Reid said he hopes such modifications will entice Republicans to vote for the bill after the elections this fall, when Congress is in its "lame duck" session.

"Now it's a time out period," Reid said. "We'll see if we can come up with something before the end of the year. I'm confident we can, and we should," he said.

The bill, which includes provisions to promote home energy retrofits, electric vehicles, and natural gas trucks, will not include a cap and trade system for decreasing carbon dioxide emissions. Cap and trade, he said, "doesn't have the traction that a lot of us wish it had."

Last year, comprehensive climate and energy legislation was well on its way to becoming law. After a version passed the House, pundits were concerned mostly with whether it would be passed in time for the Copenhagen climate talks last December. But Senators balked, and a drive this summer to put some sort of bill together has stalled.

Yesterday, Senate Majority Leader Harry Reid (D-Nev) threw up his hands, giving up on a comprehensive bill for now in favor of a narrow energy bill without any limit on greenhouse gas emissions or regulations to require renewable energy. What's left are measures to hold BP accountable for the oil spill, to invest in natural gas trucks (the pet project of oil and natural gas tycoon T. Boone Pickens), to improve home energy efficiency, and to restore money to the Land and Water Conservation fund.

Reid says he'll still work on a comprehensive bill, but it looks like it's out of play for the year.