LOS ANGELES/WASHINGTON (Reuters) - A federal grant programme aimed at spurring investment in the US solar industry expires at the end of this year, and its supporters are scrambling to get it extended in the lame-duck session of Congress that started this week.

Prospects for renewal dim considerably come January when a new Congress takes over, with a Republican-controlled House of Representatives and a shrunken Democratic majority in the Senate. Many Republicans want to reverse the Obama administration's US energy policy of focusing on renewable energy sources like solar and wind power.

The solar grant programme is set to expire at the end of next month, but the White House wants Congress to keep it around longer.

Vice-president Joe Biden praised the solar grants last week at an event for the Middle Class Task Force. "We have to continue to invest in clean energy, so we're also calling on Congress to extend a programme that has been really successful," Biden said.

Fans of the programme credit it with helping the United States install roughly 1,000 megawatts of solar-electric capacity this year, sustaining thousands of jobs in construction and installation and supplying enough power for up to 220,000 homes.

That is more than double the solar capacity installed in 2009 and around triple that of the year before, according to the Solar Energy Industries Association.

The programme was created last year under the American Recovery and Reinvestment Act. Under an already existing programme, developers of renewable-energy initiatives could apply for investment tax credits that cover up to 30 percent of a project's costs.

The Recovery Act tweaked that programme so that applicants could apply for cash grants instead of tax credits. To qualify for a grant, projects must start construction by December 31. If they start after that, they qualify instead for a tax credit.

The grant programme is "critical," said Recurrent Energy chief executive Arno Harris. "It gives us confidence that there are going to be lenders and investors out there with the appetite to fund these projects," he said. Recurrent was bought last month by Japan's Sharp Corp for $305 million.

At industry leader First Solar Inc, an extension "would make financing easier and cheaper", spokesman Alan Bernheimer said about its plants under development.

If the grant programme expires, many developers will be looking for investors who need to offset taxable income with tax credits. In a weak economy, there aren't as many of those investors, developers say. And borrowing against future tax credits costs more than borrowing against future cash grants— typically, around two percentage points more, developers say. The project must be completed before the Treasury Department allots the cash or tax credit.

If the solar grant programme gets extended, it will likely be part of a bigger bill dealing with extending some or all of the tax cuts created by President George W Bush, analysts say.

Working in favour of an extension is the programme's successful track record. It has helped more than 1,300 renewable energy projects in 41 states, according to the Solar Energy Industries Association, making it popular with many members of Congress.

"We're talking about thousands of construction jobs and ongoing operations jobs," said Monique Hanis, a spokeswoman for the association.

The amount of US electricity generated by solar power from January to August this year jumped 24 percent from the same period in 2009, according to the Energy Department. But it still represents less than one percent of all electricity generated in the US.