Wind Tax Credits and the State of Solar: A Discussion With Admiral Dennis McGinn
Recently, I sat down to speak with Vice Admiral (Ret.) Denny McGinn, the President and CEO of the American Council on Renewable Energy (ACORE). Adm. McGinn served for 35 years in the Navy as a naval aviator and test pilot, rising to command an Aircraft Carrier, and ultimately the 3rd Fleet. His final position on active duty was as Deputy Chief of Naval Operations for Warfare Requirements and Programs at the Pentagon, which helps scope and develop the Navy’s capabilities for the future.
State of the Solar Industry
We had a wide ranging discussion on renewable energy issues, touching on issues that will be familiar to regular readers of my blog column, including the rapid growth of solar power and the challenge of Chinese competition, wind power, the military’s transition to clean energy, and the politics of renewable energy. I’ve divided the interview into two blog posts. In this one I will talk about wind and solar, while I will focus on the military in the next.
I started the interview by asking about the state of the solar industry. Over the last three years, the prices of solar photovoltaic panels have dropped dramatically. This has been a boon to consumers, but it is hurting many solar manufacturers by undercutting their profit margins. Many have gone out of business. Some of these companies have blamed unfair competitive practices from Chinese firms for the falling market.
Despite this, McGinn maintains that the overall market for solar is strong. He points to the “pipeline of new projects in the works” as a sign of growth in the industry, pointing to utility-scale solar plants, the installation of solar power on commercial buildings, and – especially – the vast number of residential installations. He claims that the problems at solar manufacturers right now are a sign of a maturing, competitive industry; mergers, failures, and acquisitions are indicative of an industry that is growing rapidly. He added that this industry’s price dynamics are “probably on a par – or perhaps even more dramatic” than other high-technology industries at this stage in their development.
Chinese and a ‘Level Playing Field’
With regard to the challenge that China presents to solar manufacturing, McGinn maintains that competition is beneficial, so long as the “level playing field” is maintained. He added: “If, in fact, any company, and nation, or any nation-backed company aren’t playing by the rules, I think there ought to be some sort of action.” It is important to note that I conducted this interview before the recently announced imposition of anti-dumping tariffs on imports of Chinese solar panels, so I was not able to get his specific response to that event. These tariffs have divided the solar industry between the manufacturers harmed by low-cost solar imports and the installers, like Solar City, that have benefited from low-priced panels.
He maintains, however, that it is important that we do not think of the solar market as solely about solar panels. We have to think of the market as also the companies that install, finance, and equip solar energy. Overall, McGinn was optimistic, saying that it is a good thing that solar is so fiercely competitive: this will make it a stronger industry in the long run.
Expiration of Wind Tax Credits
The other major sector we talked about was wind. The American wind industry is going into a storm as the Production Tax Credit (PTC) is set to expire on December 31. McGinn maintains that “the PTC has really delivered” in creating a wind industry, all along the value chain. He is hopeful that Congress will extend the PTC as part of a broader deal on taxes and the deficit when they return for a lame-duck session after the election. While the PTC is politically controversial now, he noted that when it was first introduced as part of the Energy Policy Act of 1992, it only received 3 votes against it.
More important, however, than an extension of the PTC is trying to create a stable investment environment for wind power in the future. He claims the “on again-off again” nature of the PTC over the past decade has undercut the industry’s ability to generate true economies of scale that will make it more price competitive than it already is. He stresses that the industry knows they will not have a subsidy forever – nor should it – but businesses need predictability to be able to make market-based decisions. He noted that a 3-5 year time frame would allow a transition from government to private sector financing of renewable energy.
McGinn stressed the importance of the Total Energy USA Conference, to be held November 27-29 in Houston, Texas. He says that we need more events that really look at energy from an “all of the above” perspective. We need better diversification of our energy portfolio that looks at the value (including un-priced aspects like pollution) of each form of energy. We need to think about costs, benefits, and risks, and he looks forward to the event –– which will also host the ACORE Midwest Regional Roundtable; more information about Total Energy USA, November 27-29 in Houston, Texas at www.TotalEnergyUSA.com.
- For those who want an inside edge in the energy sector.
- Written by veteran energy analysts and insiders with a track record of accurately predicting trends.
- 100% FREE!
- And Much More...
Energy Investment Forum
June 10-11, 2013 - San Francisco, CA
A Case of Renewables versus Natural Resources
June 10-11, 2013 - San Francisco, CA