The Solar Stage is Set

I have been pretty disgusted by this whole $700 billion bailout. I felt like we let a lot of people get away with some very bad behavior; behavior that enriched some at the expense of many. Then, as the debate went on, I was alarmed to see that politicians were taking the opportunity to load the bill with pork. If you want to raise your blood pressure a bit, Taxpayers for Common Sense has identified The Top Ten Sweeteners in the Bailout Bill.

With all of that pork, though, comes legislation that I believe was crucial (which some will say is just more pork). I have often complained about the instability of our energy policy. It is hard to plan expensive projects if the tax structure in future years is at risk of significant change. This has been the case with tax credits for wind and solar power (and of course the oil industry is constantly battling this). Projects have been delayed because it was uncertain whether the tax credits for solar power were going to be extended. Congress has been extending them by only a year at a time, and this really stymies investment. With the bailout bill, Congress has now extended the solar credits until 2016, which will provide a huge boost to the solar industry. Fortune’s Todd Woody explains:

Congress sets stage for solar boom

After months of failed attempts in Congress to extend crucial renewable energy tax credits, the end game came with lightening speed Friday afternoon: The House of Representatives passed the green incentives attached to the financial bailout package approved by the Senate Wednesday night and President Bush promptly signed the legislation into law.

That it took a the biggest financial crisis since the Great Depression to save billions of dollars of renewable projects in the pipeline for the sake of political expediency does not bode well for a national alternative energy policy. But the bottom line is that the legislation passed Friday sets the stage for a potential solar boom.

  • The 30% solar investment tax credit has been extended to 2016, giving solar startups, utilities and financiers the certainty they need for the years’ long slog it takes to get large-scale power plants and other projects online. The extension is particularly important to those Big Solar projects that need to arrange project financing in the next year or so.
  • The $2,000 tax credit limit for residential solar systems has been lifted, meaning that homeowners can get a 30% tax credit on the solar panels they install after Dec. 31. That will save a bundle – especially for those who live in states with generous state rebates – and goose demand for solar panels makers and installers like SunPower (SPWRA) and First Solar (FSLR). (If you buy a a $24,000 3-kilowatt solar array in California – big enough to power the average home – you can claim a $7,200 federal tax credit. Add in the state solar rebate and the cost of the system is cut in half.)
  • Utilities like PG&E (PCG), Southern California Edison (EIX) and FPL (FPL) can now themselves claim the 30% investment tax credit for large-scale solar power projects. That should encourage those well-capitalized utilities to build their own solar power plants rather than just sign power purchase agreements with startups like Ausra and BrightSource Energy.

“The brakes are off,” says Danny Kennedy, co-founder of Sungevity, a Berkeley, Calif., solar installer that uses imaging technology to remotely size and design solar arrays. “In just six months since our launch we’ve sold about a hundred systems. With an uncapped tax credit for homeowners going solar, we expect business to boom.”

They did only extend the tax credit for wind by one more year, but wind energy is growing so fast that it may be able to survive without the tax credits in the not too distant future.

But if you are a fan of solar power, these provisions should dramatically boost the prospects of the U.S. solar industry.

31 thoughts on “The Solar Stage is Set”

  1. Good news on solar.

    But the whole financial crisis is a lot more complicated than a bunch of “bad” or “greedy” wall street guys:

    As often happens, government distortions of markets can backfire even when based on “good” intentions.

    The next bubble will be all the corn ethanol pork projects.

    The solar tax credits, though shouldn’t produce the same kind of distortions, hopefully.

  2. Louisiana has a 50% rebate on systems up to $25,000. Unless it gets culled back after 12/31,we’ll be looking at an 80% discount. There’s already a backlog on solar installations.

  3. Whiskey Tango Foxtrot! I was relieved to hear that the Senate bailout took care of the wooden toy arrow problem. I’m sure lots of us were struggling to decide whether to pay the mortgage or buy wooden toy arrows.

    I really don’t have a problem with the solar tax credits. RR is correct in that businesses need to know long term what tax and incentives are available so they can plan.

    The Reason article on the bailout does a good job of explaining why even a small amount of foreclosures is threatening the financial system. The root cause is government policies that promoted loans to unqualified borrowers. The threat to the financial system is mark-to-market rules.

    But I think there is another way to handle the mess. The Fed could agree to be the buyer of last resort for all mortgage backed securities. But, say at 80% of face value. This would establish a floor price for mark-to-market. The fed could then repackage the loans and cull out the really bad credit risks. At the same time they could temporarily relax the reserve limits to allow banks some breathing room.

  4. It is touching! Lots of otherwise smart people think that this Congress passing an Act promising to extend solar subsidies binds the next Congress. No way, guys! Not in law, and not in practise.

    To be realistic for a few moments, the political class justed voted to spend a bunch of money they don't have.

    When (not if) the Chinese & the Saudis think twice about throwing more money into Washington's insatiable maw, the politicians run into problems. And those promises to continue & expand solar subsidies will seem about as empty as the promises other Congresses made to provide Social Security.

  5. Maury-
    If you live in Louisiana, you should look at oil palm trees. If oil goes to $250 the way RR says, the new high-yielding hybrids will make you rich. If oil stays above $100, or thereabouts, you should do fine.
    Kine: there is an odd reality about the American democratic system: If an industry can get entrenched anough, and employs enough people and builds up lobbying power, then it can influence future legislation. Witness the ethanol lobby.
    If solar keeps growing, eventually it gets to that critical mass. Then it can become permanently subsidized, just like ethanol.
    Farmers are another example — 70 years after the dustbowl, and after electrification, and after cell phones, and after online information systems, we still subsidize farmers as if they were a bunch of backwoods hicks beating their brains out behind a plow-mule.
    On the bailout: There is canard making the rounds that the community reinvestment act (CRA), put on the books in the 1970s, somehow caused this bath.
    BS. Banks extended loans to whoever, with no documenttation, as they could sell the loans, often through Wall Street.
    Merrill Lynch and Lehman Bros and Bear Stearns were never banks, and they all tanked.
    Moreover, no bank has to join the FDIC. If you want, you can be a private bank. Then you have to comply with zero federal rules. Only banks that join the FDIC, and get desposit insurance, have to comply with federal rules. But it is their choice to join.
    Lastly if this CRA law was driving banks into oblivion, why on earth did they never lobby against it? Why did not the boards of these banks signpetitions and publish it in the newspapers, etc? I never heard a peep. Did anyone?
    Hey, the banks were making tons of money on origination fees, and did not care about loan quality. They we selling the loans anyway.
    Yeah, I am smoking mad too, at both political parties, and the endless sea of corruption that seems to define DC these days. On the housing industry, neither party seems to have considered oversight of the home loan industry to be worth doing.
    I most blame Bush, as it happened on his watch, and the buck is supposed to stop somewhere. In my book, whoever is prezzy has to either stand up on a issue and say there is a clear wrong (which Bush never did) or take responsibility. I have yet to see Bush take responsibility for anything, so big surprise he does not now. His craven, decadent speech, attempting to lay blame elsewhere, somewhere before he became prezzy, was the most self-indulgent tripe I have seen outside a West Hollywood drag queen revue.
    I guess the country will survive this “administration,” but it is looking dicey. We are still running up huge bills everywhere, while Bush snoozes in his Crawford TX ranchette.

  6. Robert,

    Which US solar companies are best positioned to take advantage of this now-established regulatory environment?


  7. The solar stage is indeed set if you like Greek tragedies. First, a group huge for all those think solar is renewable energy and good for the environment.

    Yes, the sun’s energy is renewable but the equipment to convert sun’s energy to a useful form is not. It is like the H2 economy lie, ‘hydrogen is the most abundant element in the universe.’ However, we live on the planet earth where H2 is mostly in the oxidized form already.

    Second, the equipment to convert sun’s energy to electricity does not work very well. It is shiny so it makes nice pictures. If you are good at engineering, you can make it work and keep it working. However, once you have the picture and the tax write, why continue the effort to keep working?

    Having said that, success or failure of the solar industry will have no effect on the economy. Think of the hoola hoop. We have survived fads before. Demise of the solar industry again will only be a Greek tragedy for a few con artist.

  8. ROBERT–

    as i replied to your blog several months back[following your empoyment change]when you discussed frustration with washington’s legislative foot dragging on tax incentives for alt energy et al–

    “…it’s silly season in washington….tax incentives will happen….when the ‘price of vote’ is met…”. TIT/TAT, quid pro quo,etc etc. POLS are POLS,they work for themselves.

    sign me: GERRY MANDER


  9. kingofkaty:
    You want to be scared? Look at national debt figures, starting with the first Reagan Administration. They explode under Reagan, then skyrocket under Bush No. 1. They flatten under Clinton, and soar to the moon under Bush No 2. (Story in today’s LA Times).
    Carter lleft us with about $1 trillion in national debt. We now have in excess of $10 trillion, and accelerating.
    If you wanted to wreck America, you could not do better than those three R-Party Prezzies.
    We now owe $30,000 for every resident of America, compared to a few thousand back in the Carter days. A family of four has $120,000 in R-Party bills to pay.
    Go ahead and vote Republican — and sell your children, and grandchildren down the river. Unless you plan to migrate to another country (a reasonable plan), then voting for the R-Party is a vote for economic suicide.
    Annoying whining liberals bother me too — but jeez, if you want to destroy a nation without firing a shot, then vote for the Republicans. And radicals? Even they are safer. Bombing a building? That is going to hurt a nation? Printing pamphlets?
    I know Hillary Clinton and Obama are an anethema to many. They are not very charming people. In contrast, Sarah Palin is a hoot. It would be fun to dress Dick Cheney up as a moose and set him loose in Palin country. I wonder if he would like hunting then.
    We can rid ouselves of Cheny, but we know what the R-Party will bring us: More and more and more debts, mounting to the moon.

  10. benny – I hate to break it to you but all federal spending bills originate in the House and then must be approved by the Senate BEFORE going to the President. Those Clinton deficits came after 1994 when the Republicans controlled the House.

    So both parties must share in the blame for ever expanding government. I am outraged that our government is twice as big as it was in the 1980s in constant dollars. But it is ever expanding spending that has gotten us here.

    We have the 2nd highest corporate tax rate in the world. And high personal tax rates.

    But if you think that Barack Obama will do anything to cut spending you must be smoking something. He is constantly talking about making government bigger, not smaller.

  11. king-
    The Prezzy has veto power.
    Addtionally, it is the President who proposes a budget, which is undertaken by the Congress. The Prezzy proposes a budghet through the OMB.
    Reagan, Bush 1 and Bush 2 never even once proposed, let alone fought for, a balanced budget. They only proposed huge red ink baths.
    Clinton proposed balanced budgets, and then surplus budgets. Hey, give an R-Party Congress credit for going along with Clinton. I guess it will the last balanced budgets we ever see.
    Okay forget Clinton and Reagan. History.
    During the first six years of the Bush 2 presidency, he had an R-Party House and Senate. We had gushers and gushers of red ink. Bush said it was extremely vital we win a global war on terrorism, and proposed two huge tax cuts to pay for it. We really toughed it out, and endured those tax cuts so could could win in Iraq, and establish a Shia Islamic state. Now Iraq looks to Iran for friendship, and gives it biggest oil contracts to Red China.
    I am glad we ran up nation-busting amounts of red ink to accomplish that.
    And we are so ahead of the curve in our energy policy too, after those R-Party years.
    King, I have voted for the R-Party for the last time. It is folly, folly, folly.
    Anyway, check out Thailand, Sweden, France, China, Germany. Those are countries with a future.
    Between your family and mine we owe $240,000 in federal Reagan-Bush-Bush IOUs, and that number is going straight to the moon, no matter who is the next president.
    And you want another Republican?

  12. Sweet deals for banks or oil bad, sweet deals for solar and wind good.

    Two legs bad, four legs good.

    The problem is believing that politicians make better calls allocating resources than the combination of all economic agents left to their own.

    They don’t.

    But people never learn because they keep hoping the pork will come their darling cause’s way.

  13. King, I'm sorry but you're an ignorant twit. That video is of a youth group that is essentially role playing a historic African-American fraternity, and using Obama as an inspirational role model. You can see it in the "steps" and the gold-painted boots.

    Omega Psi Phi is a national service organization that happens to throw great parties. They started because they couldn't join white frats. Nothing at all like the white "fraternities" like Skull & Bones, the KKK, I could go on. You're full of it.

  14. Guys-
    Forget oil. Down below $90, and headed towards $40 or less. Oil is finished for this cycle. Dead, dead, dead.
    I hope everybody reading this column makes it through the next several years. Our financial system is really troubled. Dow below 10k now.
    We are on Bush jr’s bridge to nowhere. This is ugly.
    Well, at least the energy crisis is solved. There will plenty to go around now.

  15. anon – ever heard the term “Obamabots”? It doesn’t seem like a good idea for Obama supporters to be making videos that resemble communist children’s propoganda performances or military drill parodies spouting Obama speak. It seems to me that if you want to expand your voting beyond the base you should avoid things that make your candidate look silly.

    I am surprised that someone doesn’t say “Hey, people might take this the wrong way, maybe we shouldn’t do this.” Yes, I know about the Omegas. We had a chapter at my undergraduate university.

    If ardent McCain supporters made a squre dancing video where the caller yelled out McCain slogans I would make fun of that too.

    Somebody hasn’t . . . have they?

  16. Benny – I would agree with you that Bush and the Republicans screwed things up.

    I just don’t think voting for Obama: a free spending, big taxes, big government liberal is the way to fix the problem. That said, I’m not happy with McCain either.

    You don’t honestly believe that if Obama is elected we get budget surpluses again.

    You said the Community Reinvestment Act wasn’t partly to blame for the current financial crisis. That is just another Democrat party talking point. I saw a report last night on TV about the crisis. They named names. Barney Frank, Chuck Schummer, Chris Dodd, all leaned on Fannie and Freddie to make questionable loans. The Bush administration tried to do something about it but was shouted down. Countrywide and other lenders were ready and willing to make such loans and Wall Street bankers were more than ready to bundle the loans up into Mortgaged Back Securities that were sold and resold at a profit. But the ROOT cause of the problem is making sub-prime loans to people who wouldn’t ordinarily qualify for them.

    Loaning money to people with no credit history, no money down, interest only at 3% then jumping to 10% is NOT a way to create affordable housing. It is a way to create bad loans.

  17. Credit default swaps caused this crisis. They allowed the sub-primes to build up. It was Democrats and Republicans alike. I know it’s easy to blame the other side, but it’s really not accurate in this instance. Also, must you so blatantly parrot Hannity, Drudge, Beck, O’reilly and the others?

    Anyone that objects to what those kids in the video were doing, as well as any hypothetical square-dancing McCain supporters, needs to determine the true cause of their xenophobia. Nothing is wrong with either, in my opinion. Why so uptight? Perhaps those specific little “obamabots” have found a bit of hope in a guy that’s more like them anyone else in power, and that makes them feel good. It’s not *that* hard to fathom, is it?

  18. King-
    I agree with you, and I posted, that we will not see a balanced federal budget again for a long, long time. And each year piles more debt on our grandchildren’s backs. Australia is calling us?
    I wonder if Obama — or anybody — can fix this mess we are in. I must confess I am weary of Democratic plans to spend money on social welfare, and the “waa-waa” element of the D-Party.
    On the other hand, Clinton cut welfare and ran surpluses. Bush, in contrast, boosted Medicare drug outlays by hundreds of billions and runs a Niagara of red ink.
    And then there are “Baby Bottle Republicans” who want tax cuts even in wartime.
    Despite being on the other end of the political spectrum from you King, I enjoy your commentary. A monologue is not as fun as a dialogue.
    I hope this financial mess leaves you unscathed.

  19. It shouldn’t be surprising that this legislation is inefficient. How long did it take to make?

    I’m glad this imperfectly enforced “pork” item was added, but hope it can be improved to favor accountability and its purpose sustained. I’d love to hear any ideas, construcitve or not, as to how this bicycle commuter “pork” can remain and be properly accounted for or expanded. See a summary of it below.

    The employer tax break is laid out in Sec. 211, “Transportation fringe benefit to bicycle commuters,” which is under the Transportation and Domestic Fuel Security Provision section in H.R. 1424. The $20 a month tax relief per bicycle commuting employee is to cover the cost of any employer reimbursement for reasonable expenses incurred by the employee “for the purchase of a bicycle and bicycle improvements, repair, and storage, if such bicycle is regularly used for travel between the employee’s residence and place of employment.

  20. Anon – There is plenty of blame to go around here. But the Democrats are saying it is a lack of oversight and free market greed. I don’t buy that. Dems pushed for Sarbannes-Oxley which created the mark-to-market mess. Dems in 2003 and in 2005 rejected further restraint of Freddie and Fannie when it might have stopped the current crisis.

    The housing market reached a point where everyone who COULD qualify for a home loan already had one, so they had to open it up to people who normally wouldn’t qualify. Such programs were VERY popular in the minority community and primarily Democrat congressional districts. (See Detroit for an example.)

    Benny – we could fix the problem if we would freeze Gov’t spending at the current size less 1% in real terms, INCLUDING the military.

  21. King-
    I share your concerns about mark-to-market, especially for cyclical industries such as real estate. It seems to me that rule could be moderated, so that a lender has several years to gradually mark down a bad loan. If the real estate recovers in five years, then fine, it recovers before the full markdown. If not, then the asset is truly depressed, and should be marked down.
    I am with you on limiting federal outlays. I think they should be set at 17 percent of GNP, and then we can argue about how to divvie up. We can cut or raise taxes for stimulus, with the general idea of balance, or small deficits (some federal spending is for capital improvements. However, neither party has the resolve to live with a budget.
    I fear the Republicans will, in fact, run much larger deficits than the Dems.

  22. Washington needs to understand that they can’t keep yanking the chain on business, energy projects and infrastructure take decades to roll out. True for solar, but also true for oil (think retroactive “windfall” profits taxes).

  23. Recessions are good in some ways. Businesses get leaner and meaner,or they go kaput. Just the fear of recession has busted the commodity bubble. Corn is down 45% from its June high. Ditto for soybeans and other crops. Oil and natural gas are down almost as much. As for the national debt,I don’t think $10 trillion is much debt for a $10 trillion economy. Isn’t that like making $50,000 a year,and having a $50,000 mortgage and no other debt?

  24. Maury-
    Yeah, that's $10 trillion of federal debt, on top of household debt, business debt etc. Federal debt is also (thanks to Bush & Co.) rising like a rocket. It probably will be $14 trillion in a couple of years.
    Total US debt is $50-odd trillion.
    So, it is more like making $50k, and owing $250k. Not terrible, but a serious debt monkey.

  25. Interestingly written!

    Undoubtedly, the current era is an era of solar power. It will save us from huge and unwanted expenses searching for other sources of energy.

  26. Benny,that analogy I used earlier was flawed. Federal revenue is only about $2.5 trillion annually. So,it’s more like someone with net income of $25,000 servicing an interest only mortgage of $100,000. Federal debt is about 80% of GDP. The EU has federal debt of about 60% of GDP. Of course,the EU doesn’t pony up for a large portion of our defense. Maybe our budget would be balanced if we weren’t playing world policeman. How much would it honestly take to defend against possible invasions by Mexico or Canada? Somewhat less than $500 billion annually,right?

  27. I’m trying to understand the cost breakdown for solar installations…I’m also curious – what is the difference in breakdowns between crystalline and thin – film?

    – Stassja

Comments are closed.