California solar power companies are breathing a sigh of relief as Congress on Friday passed a solar tax credit that could provide billions in future funding.

The renewable-energy Incentive Tax Credit bill was attached to the larger $700 billion Economic Growth and Financial Stabilization Act of 2008, which passed on a 263-171 bipartisan vote and was signed by President George Bush a few hours later.

The tax credit portion of the law beefs up and extends an expiring tax credit for renewable-energy projects. It extends a wind power credit for one year, extends geothermal and biomass energy credits for two years, and provides incentives to the solar industry — such as the removal of a $2,000 credit cap for residential solar installations — for eight years, until 2016.

Other provisions include $800 million for clean-energy bonds. The total package is worth $17 billion over eight years.

Los Gatos-based solar installer Akeena Solar Inc. described the new law as “good for the country.” Now customers can see a full payback of their solar investment in half the time, said Akeena chief executive Barry Cinnamon.

“We applaud the leadership in Congress for passing this critical solar tax credit legislation,” said Robert Fishman, president, CEO and chairman of Palo Alto-based solar thermal company Ausra Inc. “Deploying solar projects that can provide power on the scale of a public utility requires a stable investment environment.”

Meanwhile, executives at solar companies believe their pressure helped it pass.

Jose Radzinsky, CEO of San Jose-based Renewable Power Solutions Inc., had been writing furiously to members of Congress urging them to approve the energy credits. He spent a week in Washington, D.C., four months ago to meet with legislators and promote the tax credit. He said he also wrote letters to “complain heavily” about the issue.

Greg Blue, Hayward-based OptiSolar Inc.‘s vice president for government affairs, said before the vote that OptiSolar wasn’t affected in the short term by the ITC but that the solar sector would add 440,000 jobs over the next eight years if the incentive package became law. OptiSolar is building a plant in Sacramento County at McClellan Business Park that it says will ultimately employ 1,000 people.

The Solar Energy Industries Association said it was “major step” toward energy independence which could provide up to 39,000 jobs and $8 billion in economic investment in 2009.

Frank Wolak, an economics professor at Stanford University and whi is affiliated with its Program on Energy and Sustainable Development, said the tax credits are basically a subsidy.

“It makes it economically affordable to invest in solar technology,” he said. “The primary goal is to stimulate the use of it.”

But such subsidies are “always beholden to politics,” Wolak said.