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By Robert Rapier on Oct 3, 2008 with no responses

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.