US renewable energy firms this weekend issued a collective sigh of relief, after the House of Representatives voted to extend renewable energy tax credits that had been due to lapse at the end of the year, as part of the controversial $700bn (£400bn) Wall Street bailout package.

The House voted by 263 to 171 in favour of the Economic Stabilisation Act, which will essentially see the government buy up much of the bad debt accrued by Wall Street that is at the root of the recent turmoil on the world's financial markets.

The House had rejected a previous version of the bill, sending global stock markets into a nose dive, and consequently legislators attached a number of sweeteners to the bill in an attempt to secure support from Republican and Democrat representatives, including the legislation to extend renewable energy tax breaks.

The renewable energy package had been stalled for much of the year by a dispute between the House of Representatives and the Senate over how to pay for the tax breaks, prompting concerns that the credits would be allowed to lapse.

Renewable energy firms feared that an end to the credits would mark a major blow to the still embryonic industry, putting an estimated $19bn of investment and more than 100,000 jobs at risk.

Under the newly passed legislation, the production tax credit for wind energy developments will be extended by one year and those for marine renewable projects will be extended by two years. Meanwhile, the 30 per cent tax break on both residential and commercial installations of solar panels will be extended by eight years.

Purchasers of plug-in electric cars will also receive tax breaks of between $2,500 and $7,500, while tax credits for producers of biodiesel have been extended until 2009 and tax credits for home owners making energy efficiency improvements to their properties will continue.

In addition, the so-called "splash and dash" loophole that allowed producers of biofuels outside the US to ship their fuel to the US and simply add a small amount of US biodiesel to qualify for the tax break before shipping it onto other markets, has been closed.

Greg Wetstone, senior director of governmental and public affairs at the American Wind Energy Association, welcomed the passing of the legislation, claiming that the tax credits were "essential to the continued growth of wind energy, to the economic and energy security of the US, and to a successful beginning in the fight against global warming".

However, it was the solar sector that was left with the most to celebrate, after the bill not only extended tax credits by eight years, but also eliminated the previous $2,000 monetary cap on breaks for domestic installations and axed rules prohibiting large energy utilities from using the credits.

"By passing this bill, Congress has finally given the solar energy industry "policy certainty" that will attract investment, expand manufacturing and lower the cost of solar energy to consumers," said Roger Efird, chairman of the US Solar Energy Industries Association (SEIA) and president of Suntech America, a leading Chinese solar power manufacturing company. "This will allow companies like mine to move forward with expansion plans to serve the growing US market."

Citing a recent study by analyst firm Navigant Consulting, the trade group claimed that the eight-year extension would help create 440,000 permanent jobs and result in $325bn of private investment in the solar industry.

SEIA president Rhone Resch said that the sector had the potential to become a major employer over the next eight years, effectively replacing many ailing heavy industries.

"Over the last two years, these tax credits have turned the solar industry from a small, cottage industry into an economic engine for America," he said. " Electricians, plumbers, roofers and construction workers can now get back to work. These jobs are the backbone of the American economy and the solar industry is creating them at a time when they are needed the most."

The sector's confidence was mirrored on the stock market, where several leading solar players saw share prices climb.

Meanwhile, environmental groups offered a divided response to the new package, welcoming the extension of the tax credits, but opposing measures designed to secure the support of some Republican representatives which will see tax credits for refineries that process oil from shale or tar sands extended.