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.)

CA Home Solar Sales 2009: Early Results

John Supp, program manager of the CA Solar Initiative at the California Center for Sustainable Energy (CCSE), said 71 residential solar rebate applications have been processed thus far this month by SDG&E customers with another 12 apps just hitting his desk. Nearly twice as many reserved rebates in 2008 compared to 2007. Despite the weak economy, Supp said this is a good start compared to a year ago and is a likely reflection of the improved federal tax credit.

"A lot of buyers are purchasing 5kWDC systems so the 30% tax credit means $9000 instead of the $2000 maximum allowed [from 2006 through 2008]," said Supp. He went on to say it appears installed costs have dropped from December to this month. Average installed cost last month in San Diego was $8.40/WDC; this month it's about $7.98/WDC installed but he adds this if from a relively small sampling. This compares to $8.52/W in the PG&E territory (Santa Barbara to San Francisco) and $9.05/W in the SoCal Edison area (Central CA).

Has there been a major drop in panel costs as was widely anticipated late last year?

"There's been a lag in the market and supply to see much noticeable change in panel prices. In fact, statewide installed prices are up from the last six months of '08," Supp remarked. Average installed costs for home PV systems from July-December averaged $8.17/WDC and this month it's up to $8.70 statewide with the limited data available. Supp surmises the impact of the 30% solar tax credit [with the CSI rebate], which defrays so much more of the cost for the end user, could be the culprit. Cost data has fluctuated differently over the years in each utility territory and there is the obvious answer. Still, it's much too early to say if this will be a continuing trend.

In 2007, when the CA Solar Initiative (Million Solar Roofs) went into effect, 560 rebate applications were filed with CCSE by SDG&E customers with only 25 were cancellations (4.46%). Last year 1074 applications were processed with just 11 cancelling (1%).

"The fact so many went solar last year is exciting for the industry in that the rebate was reducing from the initial $2.50 per watt and the tax credit was just $2000," said Supp. "It seems people are realizing that while incentives are depleting, solar's value keeps rising."

Commentary: Invest in Solar NOW

Even the casual observer of U.S. stock markets would know there's only a minuscule amount of publicly-traded companies doing well. Even the Blue Chips--what's left of them--are down. Renewable energy stocks are taking hits, too, and such solar biggies as First Solar, SunPower and Applied Materials are not immune.

So why invest...

In Solar Stocks? Barack Obama mentioned solar power in his inaugural speech on Tuesday. He has pledged to work with Congress on pushing solar power for immediate manufacturing and installation jobs; stimulating more solar R&D; reducing dependence of coal and natural gas; and, in the process, cutting carbon emissions worldwide. No other industry today can offer so much potential for return on investment and social betterment. Besides, contrarian investors should see solar stocks as sure-fire buys. (Check Solar Stocks Update here every Saturday.)

In Solar at Home? Starting January 1, residential solar installations qualify for a 30% tax credit of the purchase price. Many states have adopted their own solar tax credits and rebates to make going solar a sweeter deal. Contrary to some thinking, solar makes sense in all 50 states. In fact, a PV system will perform slightly better on a cold clear day in Michigan than on a hot day in Arizona. Why invest now? Because several states are so cash strapped they're considering reducing or dropping solar incentives to generate income for their general funds. As we've seen over the past six months, financial benies can be fleeting. Stated simply, the best solar incentives we may see for awhile are the ones we have RIGHT NOW.

In Solar for Business? Last spring the CEO of Southern California Edison said the price of electricity from the utility would double in five years. This could change if we go into a depression but who knows for sure? State and federal government nurtures solar investments with rebates, a 30% federal tax credit, five-year accelerated depreciation and business investment tax credit. If the Obama Administration institutes a formal carbon cap-and-trade program, then solarized businesses will also be able to sell their carbon credits annually to offset pollution generated by other companies. Europe has been doing this for years. And remember, savings on electricity begins the moment a photovoltaic system is commissioned and producing energy. Systems can last 30 years or more. No other working investment offers such reliability and longevity.

We're all facing financial challenges right now. We're learning or re-learning a common sense approach to discretionary spending. Solar power's future makes sense as a stock investment. Solar power makes sense at home and at work because it mitigates future electricity costs as it cleans the air and slows global warming.

Incentives, Oversupply Could Mean Great Solar Deals

Now that the federal solar investment tax credit has been extended (see Oct. 5 post below), it's time to size up what your state has in the way of incentive for photovoltaic (PV) systems. This information and more can be had at the Database of State Incentives for Renewables & Efficiency (DSIRE) compiled by North Carolina State's Solar Center. For further reference see Related Links at the beginning of this blog.

Besides the federal tax credit available in all 50 states and territories, eleven states provide incentives from both state and utility resources. These states are California, Florida, Indiana, Maryland, Massachusetts, Minnesota, Oregon, Pennsylvania, South Carolina, Wisconsin and Wyoming, plus the U.S. Virgin Islands. New Jersey had an attractive PV rebate program but ceased taking reservations in August. Details for each program are delineated at the DSIRE site. The remaining of states fall under three categories: state-only incentives; utility-only incentives; or neither incentive programs underway (the federal tax credit still applies.)

OK, but how would an average homeowner or business owner put this into perspective? For the sake of simplicity and the range of PV installation prices around the country, let's figure a price of $9 per AC watt installed. This includes all engineering and design, permitting, panels, inverter, racking, AC/DC disconnects (where required), and installation (labor). A typical family in California can use a 4kWAC system. At $9/watt the gross price (less sales tax, if not exempt in your state) is $36,000. The federal solar tax credit of 30% reduces the cost by $10,800 and an average rebate now is around $2.50/watt or $10,000. Net cost after incentives would be $15,280 or about 42% of the original cost. As a business investment, rebates are taxed as income by the IRS but not, to my knowledge, for individual homeowners. Also, in California a PV system is not added to your home's assessed value for property tax purposes. It is suggested to consult with an attorney or CPA about this issue if you're in another state.

PANEL PRICES COULD DROP

Last Monday Goldman Sachs downgraded the stock of both First Solar and SunPower, two of the nation's leading solar panel makers. The reasons Goldman Sachs gives are oversupply issues and a lack of European subsidies.

"The risk of oversupply in the solar market will soon become a reality as considerably less generous demand subsidies take hold just as a wave of supply and tight financing hit the market," said Goldman Sachs analyst Michael Molnar in a client note. "We believe that liberal subsidies of the past in markets like Germany and Spain are unlikely to be replicated in the future given fears of their ultimate cost in a bad world economy."

"We strongly believe that SunPower and First Solar are two of the best solar companies in the world and that both will be part of the growing solar industry for years to come," Molnar wrote. "However, in our view, even these companies will face headwinds in a market that is oversupplied with modules." (greenstocksgeneral.com, Oct. 7)

So this winter or spring could be an ideal time to go solar because panel pricing could be the best ever so far. But as a fellow solar associate of mine said today everything could be in good supply next year except money. Still he says, if you have it solar power is a great long-term place to put it.

Notorious Bill Extends Solar Tax Credit

Just when it looked like the sun would set on the federal solar investment tax credit, it will live on to see another day--make that eight more years. The tax credit for wind was extended a year.

The House of Representatives passed the Emergency Economic Stabilization Act of 2008, Friday, October 3, by a vote of 263 to 171. Less than two hours later, President George W. Bush signed it into law. The Senate had already passed it on Wednesday. Of course, the full intent of the legislation was welfare for Wall Street but banks will afford to make business loans to rev up American capitalism on Main Street. Extending the solar/wind tax credits also makes the bill more palatable.

"I am pleased that the bill includes an extension of tax cuts for clean renewable energy that will create and save half a million good-paying paying jobs in America immediately," said House Speaker Nancy Pelosi of California.

The one-year production tax credit extension also applies to other energy sources such as geothermal; closed-loop biomass; hydropower; landfill gas; and trash combustion facilities. It also creates a tax credit for a new energy production category - marine renewable - which is energy derived from waves, tides, and currents.

Furthermore, the measure boosts the tax credit limitation for fuel cells from $500 to $1,500 per half kilowatt of capacity.

Renewable energy purists must shudder at another part of the bill. It also provides tax credits for advanced coal electricity projects with highest priority given to projects with the greatest separation and sequestration percentage of total carbon dioxide emissions at a cost of $1.4 billion over 10 years. This writer believes the technology and time it takes to sequester CO2 at a coal-fired power plant would more efficiently be spent on truly renewable forms of energy generation, like solar, wind, geothermal, biomass conversion and marine methods. Like Halloween, Congress and the White House feel they must spread the goodies around.

"This bill is a major step in our long journey toward energy independence and ensures that solar energy will be a significant part of America's energy future," said Rhone Resch, president of the Solar Energy Industries Association, which lobbied long and hard for the tax credit extensions during the previous 18 months.

Resch said 60,000 Americans currently are employed by the solar energy industry.

"This long-term extension of the solar tax credits will create a domestic solar industry with hundreds of thousands of jobs while providing clean, affordable, carbon-free energy to millions of American families, businesses, and communities," said Resch.

The bill extends the solar investment tax credit for eight years the 30 percent tax credit for both residential and commercial solar installations. The $2,000 cap for residential solar electric installations is eliminated and so is the prohibition on utilities from benefiting from the credit. When the tax credits first were enacted by the Energy Policy Act of 2005, the solar industry experienced unprecedently growth. In fact, the amount of solar electric capacity installed in the United States during 2007 was double that installed in 2006.

"This bill puts the sun to work for every American," added Resch. "And by 2016, we expect solar energy to be the least expensive source of electricity for consumers."

The Ever-Evasive Tax Credit Renewal

As most of you already know, the Senate passed House Bill 6049 as amended last Tuesday, Sept. 23 by a 93 to 2 vote with 5 abstentions. Today, the House passed its final version by a 226-166 but according to a story in the Tucson Citizen the "White House has (again) threatened to veto the House bill over its funding mechanism, and opponents have called the bill a dead end. Should President Bush veto the energy bill without a challenge by Congress, the credit will expire Dec. 31." If this happens, there might be a last gasp effort during a lame-duck session after the general elections. As the bill now stands, the tax credit for residential solar currently capped at $2000 will be a straight 30%, the same as commercial solar investments. If the bill either dies or is again vetoed by Bush, the tax credit ends December 31. More news, if any, will be reported here. For background on this issue read the Aug 27 post "Who Needs a Tax Credit?" in this blog.

Big Solar Event Next Month in San Diego

The Solar Power International Conference and Expo 2008 is just three weeks away. Billed as the largest solar event in the world, it will run October 13-16 at the San Diego Convention Center. Reported as a sell-out for conferences and daytime exposition, there will be a free public session on Wednesday evening, 6-9 pm, for adults only. This is a business-to-business type of event.

Tax Credit Ends Dec. 31:

Get an Installation Guarantee

Anyone contemplating getting solar power installed at home or at work needs to get off the dime. The solar investment tax credit, part of the Energy Policy Act of 2005, expires December 31, 2008.

For homeowners this means losing a 30% tax credit on the cost of a photovoltaic system, capped at $2000. Commercial entities will lose a straight 30% solar investment tax credit.

For large PV systems, say, 500kW or more, it is unlikely there is enough time left to install and commission systems by year's end. Design, engineering, environmental reviews (if necessary), procurement of components, installation, inspections and commissioning are time consuming even on a fast track schedule.


Get a guarantee


Several large entities like water treatment plants and military bases require bid bonds in their requests for proposals (RFP). Bid bonds are a financial guarantee by a surety to the project owner, that the contractor will honor his bid price, enter into a contract and supply the required performance and payment bonds. The bid bond amount is usually 5 to 20% of the total bid amount. If the contractor fails to honor his bid or cannot furnish the performance or payment bonds, the surety is liable for the difference between the first and second bidder up to the face amount of the bond.

As the solar industry is still relatively new, many solar integrators have not built enough credit history in their businesses to even be bondable. Although this deters some newer (smaller) solar integrators, it also tempers a potential bidder's urge to submit an unrealistically low estimate just to land a project.

If you are about to go solar and are counting on the federal tax credit, get a guarantee it will be installed AND commissioned by December 31. Require a bid bond by your installer for a project over 50kW. Otherwise, get a written guarantee from the installer (or an addendum to the installation contract) that the system will be finished by the deadline OR the contractor either will pay $2000 or deduct it from the final payment if the deadline is not met.

There is already a run on PV system components as a glut of systems are being rushed to completion. Procurement of panels for some dealer/installers is already dicey in several areas. Simply stated, delayed installation may or may not be the installer's fault.

For those of you who will still install with or without a tax credit, I commend you. But for those who need incentives to make a PV system financially feasible, take charge of your position. It's your money.