Solar panels will line the right of way.

The Oregon Department of Transportation began installing the nation’s first solar project in a highway right of way in August. The Oregon Solar Highway Project sits at the intersection of Interstate 5 and Interstate 205 and will consist of 104-kilowatt array that will provide 28 percent of the electricity needed to light the exchange. It is funded through a partnership between Portland General Electric (NYSE: POR) and U.S. Bancorp (NYSE:USB) Community Development Corporation (CDC).

The financing arrangement was put together by Portland-based United Fund Advisors, an affiliate of Portland Family of Funds Holdings Inc. Under the agreement, the CDC will own the federal and state tax benefits of the project until they expire in five years, at which time ownership of the entire $1.4-million project will revert to Portland General Electric.

According to Chris Hasle, senior vice president of Portland Family of Funds, investing in tax-credit projects like this one is attractive enough that U.S. Bank’s CDC will invest in a fund that will finance numerous projects taking advantage of tax credits. That fund will examine projects nationwide with a focus in states that have strong incentives including California, Oregon at first. The fund will only be used for solar and fuel cell projects eligible for the Investment Tax Credit (ITC).

The ITC is structured almost identically to the Historical Tax Credit which can be claimed when rehabilitating historic properties. This means “It is not too much of a leap of faith to start doing these solar deals,” Hasle says.

Although Congress has yet to extend the ITC which is set to expire by the end of 2008, Hasle is confident that it will be extended by the first quarter of 2009, at the latest. “Renewables are too big to be ignored from a federal standpoint,” he says.