When President Bush signed the energy bill into law last month, much was made of the legislation’s mandate that automakers dramatically boost the fuel efficiency of their fleets. Less noticed was that the bill dropped a provision that would have extended the solar investment tax credit — a measure viewed as essential to transforming solar energy from a niche business into a multi billion-dollar industry that can generate gigawatts of greenhouse gas-free electricity.
The timing couldn’t be worse. With the current solar credit set to sunset, as it were, at the end of 2008, Big Solar is at at a tipping point: Utilities and renewable energy companies are in the midst of negotiating massive megawatt power purchase deals whose financing depends on the 30 percent investment tax credit, or ITC.
“I think there is a major concern that this will stall all the beneficiaries of the ITC,” said Joshua Bar-Lev, vice president for regulatory affairs for solar power plant developer BrightSource Energy. The Oakland, Calif.-based startup is negotiating a 500-megawatt agreement with California utility PG&E and is proceeding with plans to build a 400-megawatt solar thermal power station on the Nevada border (artist rendering above).
Solar energy companies, utilities like PG&E (PCG) and Edison International (EIX) as well as financiers such as Morgan Stanley (MS) and GE Energy Financial Services (GE), had pushed for an eight-year extension of the investment tax credit to give Big Solar projects enough time to get off the ground and start to achieve economies of scale. The provision also would have allowed utilities to claim the credit for solar projects they build. The measure drew support from both sides of the aisle in Congress but died — by one vote in the Senate — when Bush threatened to veto the energy bill because the solar tax credit would be financed by repealing previous tax breaks given to Big Oil.
“The Congressional leadership is very strong in their support of the ITC; they will put this on the table In 2008,” said Chris O’Brien, a Sharp Solar executive and chairman of the Solar Energy Industries Association, in an e-mail. “The solar industry will continue to contact legislators in key states.”
House Speaker Nancy Pelosi and the Democratic leadership in the Senate have pledged to re-introduce renewable energy tax credit legislation this session. “Speaker Pelosi has said repeatedly that she hopes to address that this year,” Drew Hammill, a spokesman for Pelosi, told Green Wombat. “We’re just getting started but there’s bipartisan support for the tax credit.”
Publicly, at least, no one in the solar industry will say that the uncertainty over the tax credit is affecting planned projects. “Our expectation is that there will be another tax bill that will address this issue,” said Kevin Walsh, managing director of the renewable energy group at GE Energy Financial Services. “We’re working on a number of [solar thermal] deals but it’s too early to disclose them.”
In recent months, PG&E has signed deals for more than a gigawatt of electricity — enough to light more than 750,000 homes — with solar power plant developers. Such power purchase agreements can take more than a year to hammer out and the permitting and construction of a solar power station can take another three to five years.
“We’re continuing to move forward with negotiations and with contracts that have already been signed, but certainly the absence of the ITC could potentially impact future projects,” said PG&E spokesman Keely Wachs. “Without the credit, it does increase the cost of that energy and of course it also sends a very clear market signal as to our country’s energy priorities.”
Silicon Valley solar startup Ausra is building a 177-megawatt solar power plant on the Central California coast to supply electricity to PG&E and is pursuing deals with Florida’s FPL (FPL) and other utilities.
“Just like any business, the solar industry prefers a predictable system for the future,” wrote Holly Gordon, Ausra’s director of regulatory and legislative affairs, in an e-mail. “It will be more difficult to plan for our projects while the situation remains uncertain. While we are currently seeing excellent demand for solar energy at market prices, we need a long term extension of the renewable energy tax credits to ensure market stability and investor confidence as the market continues to grow.”
Green Wombat 
I posted this before but it addresses what Todd is writing about today. This legislation would create jobs, make us more energy independent and ease the stress on the grid. There is a proposal to give 150 billion dollars in rebates to Americans due to the subprime meltdown. This energy bill would cost the government approximately 21 billion over 8 years. It would probably create revenue through manufacturing, installation and maintenance jobs. I haven’t heard one presidential candidate mention this.
Disappointing Outcome for Renewables
The Production Tax Credit (PTC) for Wind Energy and the Investment Tax Credit (ITC) for Solar Energy were not part of the Energy Bill passed by the Senate by an 86-12 margin on Thursday. Wind Energy currently receives .02 cents per kilowatt/hour (kwh) of production while commercial solar projects receive a 30% Federal Tax Credit. Residential solar projects receive a $2,000 federal tax credit. These credits are set to expire by the end of 2008. Without an extension of the Tax Credits, the Solar and Wind Industries in the United States will quickly grind to a halt. This will significantly impact companies ranging from Sunpower (SPWR), First Solar (FSLR), Evergreen Solar (ESLR) to General Electric (GE), Sanyo (SANYY) and British Petroleum (BP).
The Energy Bill that passed the Senate is being hailed for the first increase in automotive fuel efficiency standards in over 2 decades, and well it should. As written, the current legislation would increase fuel economy standards by 40%. The fleetwide standard would increase from the current 25 mpg to 35 mpg by 2020. The Bill also mandates the increased production of Ethanol to a total of 36 billion gallons per year by 2022 from the current 5 billion gallons of U.S. production. Of this, 21 billion gallons are to come from non-corn based ethanol. This might come from sugar cane, wood chips, algae and switch grass. This will require some technological breakthroughs since the production of ethanol from such sources as switch grass require the use of cellulosic enzymes whose economical production has not been perfected yet.
The original Energy Bill passed in the House by a margin of 235-181 had called for a national Renewable Portfolio Standard (RPS) that would require Investor Owned Utilities to produce 15% of their electricity from Renewable Sources by 2020. It also contained an extension of the tax credits for wind and solar through 2015 at a cost of $21 billion dollars. According to the pay as you go rules of the congress, this was to be paid for by increased taxes on fossil fuel energy industries such as oil, natural gas and coal. It is worth comparing the cost of this tax credit in relation to the daily costs of the war in Iraq and the interest expense on the U.S. government’s outstanding debt (I’ll leave this up to others). $21 billion dollars over 8 years is an insignificant expense to the federal government but would have a transformative effect on renewable energy in the United States.
Utilities in the Southeastern part of the country, especially utility Southern Co., strongly objected to the RPS. They claimed it would be much more difficult and expensive for them to reach this goal due to their lack of wind and solar resource. They argue that RPS legislation should be left up to the states. Currently, over 20 states have some sort of Renewable Portfolio Standard. New Jersey for example has a specific solar carve out for their state RPS requiring 2.2% of the electricity in the Garden State to come from solar by 2022 (roughly 1500MW). Renewable proponents argued that countries as far north as Germany,(the world leader in installed solar capacity at 60 degrees north latitude), are deriving increasing amounts of their electricity from solar. Therefore, it should be feasible for States that are lower than 40 degrees north latitude to produce significant amounts of solar energy (opportunities exist on the roof of every Wal-Mart, Target, Mall, New House). The Bill also contained a provision allowing utility companies to take advantage of the 30% Investment Tax Credit which they currently cannot avail themselves of.
The Energy Bill that passed the House came to the Senate Floor and came up for a vote of cloture. 60 votes were necessary. The vote was 59-40 in favor of cloture. John McCain was the lone abstention. Disappointing since solar is such an obvious choice for electricity production in his home state of Arizona. The vote went along party lines for the most part with notable exceptions of Republicans voting for cloture: Chuck Grassley (Iowa), Orrin Hatch (Utah), John Thune (S.D.), Norm Coleman (Minn.), Susan Collins (Maine) and Richard Lugar (Ind.). Democratic Senator Mary Landrieu of Louisiana, facing a tough reelection campaign next year in oil rich Louisiana, voted against cloture. The tax titles and RPS were stripped from the Bill and it passed the Senate easily. Even if cloture had been achieved, the President promised to Veto the Energy Bill that passed the House.
Senator Majority Leader Harry Reid and House Speaker Nancy Pelosi have vowed to bring up the PTC and ITC in the next session of congress. Without these extensions, both industries will most likely cease to install projects in the United States. Solar and Wind companies would focus on the government friendly areas of Europe and Asia. As it is, the uncertainty surrounding the extension of the credits has made it impossible for solar and wind companies to forecast and plan for projects past this year. This will inevitably lead to a slowdown in the domestic renewable energy industry.
John Moran
johnflanaganmoran@gmail.com
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“When President Bushed”
Does anyone proofread anything anymore?
“The measure drew support from both sides of the aisle in Congress but died — by one vote in the Senate — when Bush threatened to veto the energy bill because the solar tax credit would be financed by repealing previous tax breaks given to Big Oil”
So the idiot in the white house doesn’t think big oil is making enough and needs to keep their tax-cuts? Billions in profits and we are still giving them tax breaks. What a Farked up America this is.
Typical GW Bush: sell-out to oil interests instead of doing the right thing. Reducing oil consumption reduces our trade defecit, reduces America’s vulnerability to Persian Gulf nations, reduces depletion of a finite resource, and gives us more time to develop fossil-fuel alternatives. As more and more solar energy plants are brought online, the cost per kWh decreases through economies of scale and process/efficiency improvements.
And for for the enviro-wackos like myself, solar energy reduces pollution and carbon emissions.
I am such a graphic designer but seriously, the kerning needs adjustment on the title, “Wombat”… The W is so far away from ombat that it looks like two words.
Re: “President Bushed”
Ahhh… wishful thinking for his reign to be past tense.
As far as I am concerned, removal of the solar tax credit provision from the enrgy bill was a major news story.
How did this get missed by most news media? I am working in the solar industry in a new start up company that was depending on this tax credit. Delaying the change over to renewable energy like solar is a serious mistake.
I can’t wait to get a new functioning President that will make decisions on what is best for our countries future and not cater to special interests like big oil!
Another disastor from the Old GW Bush – as pathetic a leader as there ever was – the sooner he is out the better the world will be for that
This is sickening… we need to reduce government subsidization of the oil industry, like yesterday, and shift incentives toward the production and purchase of renewable energy now! Oil production has peaked, demand continues to increase worldwide, and crude continues to sky rocket. We’re funding terrorism not only via our dependence on oil, but with our federal tax dollars, and we’re destroying the planet to boot. I’m so utterly disgusted by this situation.
Such a smart economic decision wasted. So few in our government have the Cajones to stand up to the president and simply do whats best for the people the supposedly serve.
The powers of the president are very limited. It is up to the house and senate to do the majority of the decision making. i.e. who controls most of executive branch? the far left wing. Just what we need is more government control and handouts. Can people make it on there own. How many can say there was pure madness after the flooding in IA? (which happens more than once) Wait who was getting all the handouts in LA when the hurricane hit and all the want is more. when they did not get it in time blame game begins. Who to blame, but bush. LOL like it was all his fault. Give me a break. Get your act together people. We need les government control and for individuals to take part and control.