Stimulus Update: Solar Still Positioned Well

The Solar Energy Industries Association (SEIA) distributed an email update to members today concerning solar power in the national economic stimulus bill. The message continues to bode well for solar power although final legislation is still pending.

It was just last fall that SEIA and all of us in the "trenches" were groveling just to get the federal solar tax credit through Congress and the White House. Now, partly because the industry can create many green--and non-exportable--jobs fast, solar may reap several stimuli in the new legislation. These include:

The DOE Grant Program: This grant program (options to take a 30% cash grant in lieu of the tax credit) currently is not in the Senate version but it could be preserved during joint conference negotiations. SEIA is also pushing the grant program for utility-scale projects over 25MW for PV and 10MW for solar thermal.

A 30-Year PPA: SEIA is recommending the federal government to enter into 30-Year power purchase agreements to secure good long-term for solar on federal buildings and land. Neither house includes this in their bills but it could gain traction in joint conferencing.

Repeal Subsidized Energy Financing: Both House and Senate versions repeal a penalty for subsidized (rebate or state tax credit) so homeowners and businesses qualify for the full federal tax credit.

Home Water Heating: Both versions lift the $2000 tax cap on residential solar water heating systems.

Loan Guarantee Program: The new loan guarantee program is a vast improvement over the present Title XVII that could ideally include a program for "new or significantly improved" renewable energy products using advanced solar technology.

Government Procurement: Both bills include funds to increase installations of government buildings.

Altogether, if House-Senate conferences preserve key solar provisions, some 67,000 jobs and 1GW of solar power avoiding a million tons of greenhouse gases would be achieved in 2009 alone. Next year, the industry would create 119,000 jobs adding 2GW of solar power and avoiding 3.2 million tons of carbon emissions.

The Senate Energy & Natural Resources Committee and the House Select Committee on Energy Independence and Global Warming both are working on bills aimed at instituting a national renewable electricity standard.

Stimulus: 30% Solar Tax Credit or Cash Grant?

The U.S. Senate's version of the stimulus package includes a new grant plan enabling renewable energy producers to take a 30% cash grant from the U.S. Treasury in lieu of the 30% investment tax credit currently in effect. The proposal, presented by Sen. Jeff Bingaman (D-NM), aims at addressing the precarious position of the tax equity market. Expectations for a refundable ITC had been very low in the Senate's version but now, as both the Senate and House stimulus bills include this investment option, the likelihood of inclusion in the final bill looks good.

As a result of the current economic situation, the availability of tax-equity investors for solar and other renewable energy projects has dropped considerably. Some three-quarters of companies involved in tax-equity investing (power purchase agreement investor groups) are no longer contracting such deals.

"The squeeze in the tax equity market threatens to severely slow down the construction of new facilities for renewables. I strongly support the Senate package which would enable firms to carry back their tax credits for five years. But I also would support doing more, as long as we protect the American taxpayer," said Sen. Bingaman who chairs the Energy & Natural Resources Committee and is a senior member of the Finance Committee.

"This grant proposal threads the needle by offering an opportunity for developers to monetize the production and investment tax credits but does so in a commonsense way. Of course, no one is forced to accept a grant under the proposal; any project developer can still choose to get the traditional PTC or ITC route," said Bingaman.

The senator developed his approach after consultation with numerous renewable energy developers and financiers. Industry members have praised it as a workable solution. Utility-scale solar developers can also benefit from Bingaman's version because their longer build-out schedules, such projects were basically left out of the House provision.

The Obama Administration is still hoping for Congress to be finished with the stimulus bill by mid-month, a daunting task for the next ten days.

(This story is a summary derived from articles in the Feb. 4, 2009 Futures and Commodity Market News and the PV Tech Newsletter.)