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Future of federal solar programs gets cloudy | Solar Energy USA Blog Archive

Future of federal solar programs gets cloudy

Posted on Wednesday, June 29th, 2011 at 2:48 pm by Solar Energy USA

While we hope that Congress does not eliminate subsidies for a booming industry like solar, let the following article borrowed from USATODAY illustrate how there has never been a better time than now to consider a solar project:

WASHINGTON — The solar power industry is facing a double threat from a Congress that may turn off the flow of federal subsidies and take a pass on mandating renewable-energy standards that would increase demand.

The Republican-led House, focused on cutting spending and philosophically opposed to subsidizing solar power and clean energy, has targeted federal grant and loan guarantee programs to reduce or eliminate.

One is a U.S. Treasury grant program, set to expire at the end of this year, that solar companies say has kept them alive through the recession. The other is an Energy Department loan guarantee program, part of which would end Oct. 1, that has provided nearly $35 billion in loan guarantees for solar, wind, geothermal and other clean energy projects that have generated more than 68,000 U.S. jobs, according to the department.

Meanwhile, hopes for a national clean energy standard that could boost demand for solar power also are dimming in a Congress that doesn’t support government mandates about what kind of energy Americans should use.

“Is the solar industry going to die if we lose these programs? No, but we’re going to stall,” said Roger Efird, managing director of Suntech America. Its parent company, Suntech Power, which has offices in San Francisco, China and Europe and a manufacturing plant in Arizona, is the world’s largest producer of solar panels. “We’ll certainly lose a lot of jobs. There’s no doubt about that,” Efird said.

Solar employs 100,000

The solar power industry grew 67% last year — faster than any other U.S. industry — and employs about 100,000 people nationwide, according to the Solar Energy Industries Association.

Critics say it’s time for the industry to stand on its own and compete in the free market without any help from struggling American taxpayers.

“If you take a gun and force taxpayers to hand over their earnings to a solar company, that solar company is going to do very well, but the taxpayers end up getting screwed with nothing to show for it at the end of the day,” said Rep. Tom McClintock, R-Calif. He has led efforts by House conservatives to end loan guarantees and grants for the solar industry and other renewable energy industries. “We’ve spent billions on technology and research and subsidies, and it’s still the most expensive way of generating electricity.”

Solar power and offshore wind power are the costliest methods of generating electricity, according to the U.S. Energy Information Administration. However, solar’s cost is dropping as the technology becomes more efficient and the industry expands, according to the Solar Energy Industries Association. The average price of an installed solar system in a home, business or power plant fell more than 20% nationwide from the beginning of 2010 to the end of the year, the association said.

Solar advocates say it’s unfair to talk of solar standing on its own, as the federal government has been subsidizing oil, gas, coal and nuclear industries for decades. Those subsidies include tax incentives to drill for oil, federally financed dams to generate hydroelectric power, and research funding for nuclear power and clean-coal technologies.

“The government has always played a role in the energy mix through providing incentives to certain technologies or making it easier to use certain technologies,” said Richard Caperton, an energy analyst with the Center for American Progress, a liberal think tank. “Transmission lines to coal-fired power plants were built with taxpayer subsidies. If we stop spending money on some very cost-effective programs for clean energy, all it’s going to do is put clean energy at an even bigger competitive disadvantage.”

A better solution may be to get rid of all federal energy subsidies, said Nicolas Loris, an energy analyst with the conservative Heritage Foundation. “Given the financial situation of our government, energy subsidies is not an area where we need to be spending money,” he said.

Solar advocates argue that the government’s investment is paying off in new jobs. “We need to be fiscally disciplined as a country, but we shouldn’t be foolhardy by eliminating programs that create jobs,” said Rhone Resch, president and CEO of the Solar Energy Industries Association.

Finding support in the Senate

The solar industry has an ally in President Obama, who has called for a national clean energy standard that sets the goal of the nation generating 80% of its electricity from clean sources by 2035. Although it’s unlikely Congress will approve that ambitious goal, the administration could take steps to help the solar industry by allowing federal agencies to enter into long-term agreements to buy solar power, Resch said.

Solar programs also remain popular in the Senate, where Majority Leader Harry Reid, D-Nev., fought off House efforts early this year to end the loan guarantee program that helps solar companies secure financing for their projects. Reid last month announced that the Energy Department will provide conditional guarantees for the Crescent Dunes Solar Energy Project in Tonopah, Nev., creating nearly 5,000 jobs in his struggling state, which has the nation’s highest jobless rate.

Solar lobbyists said they believe the loan guarantee program will survive, although it’s not yet clear how much funding it will get this year.

McClintock and other conservatives wrote letters in early June asking the House Appropriations Subcommittee on Energy and Water Development to end innovative technology loan guarantees and other renewable energy programs. The subcommittee approved $160 million for loan guarantees, far less than the $1 billion sought by the Obama administration but enough to keep the program alive.

The future is less certain for the U.S. Treasury program that gives cash grants to solar and other renewable-energy companies. Solar companies can get a grant equal to 30% of the cost of a solar system as an incentive to develop solar projects. It was intended to help companies that were not making enough profit in the sluggish economy to take advantage of a 30% tax credit.

Extending the program beyond its expiration date at the end of this year will be tough in the House, because the grant was part of the American Recovery and Reinvestment Act, the stimulus bill passed by the House in 2009 when it was led by Democrats. Republicans say the act spent billions while creating few jobs.

“I think we’ve got a 50-50 chance of getting the grant program renewed,” Efird said.

Solar advocates say they believe they can change some minds in the House when they point out that there are solar companies in every state.

“I think solar is sometimes mistakenly thought of as a small, niche industry when it has actually created jobs all across the country,” Caperton said. “It’s not just California and Arizona. There are manufacturing companies in Mississippi, Alabama, Michigan, all over the place. When members of Congress hear that, they start to listen, and things start to change.”

Here’s a look at the federal programs that benefit the solar industry:

•The Investment Tax Credit, or ITC. Created by Congress in 2005, the ITC is a reduction in overall tax liability for individuals or businesses that invest in solar energy generation technology. It is equal to 30% of investment in energy production using solar electric, solar hot water, fuel cell or small wind methods. Expires Dec. 31, 2016.

•The 1603 Treasury Grant Program. When the recession hit, many solar companies were no longer able to take full advantage of the Investment Tax Credit because they did not make enough profit. So, in 2009, Congress included a provision in the sweeping American Recovery and Reinvestment Act — also known as the stimulus bill — that allows the owners of commercial solar property to receive a federal grant equal to 30% of their investment. If they opt for the grant, they cannot receive the tax credit. Expires Dec. 31, 2011.

•The Department of Energy’s Loan Guarantee Program. This program has two parts that affect solar. The first is known as the Section 1703 program. It was created by Congress in 2005 to support innovative clean energy technologies that are typically unable to attract conventional private financing because they are new and considered risky by commercial banks. It is not set to expire, but it depends on Congress for funding each year. The second loan guarantee program is known as the Section 1705 program. It was included in the 2009 stimulus bill to provide more loan opportunities to renewable energy companies during the economic downturn. Expires Sept. 30, 2011. To receive funding, solar projects must begin construction no later than that date.