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Extension of US solar investment tax credit emerges as key issue at Intersolar/Semicon West

14 July 2008 | By Tom Cheyney | Chip Shots

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For many of those attending the colocated Semicon West and Intersolar North America trade shows this week in San Francisco, one of the most important events in the solar industry is taking place on the other side of the country in Washington, DC. The US Senate is again discussing and likely voting on whether or not to extend the 30% solar energy investment tax credit (ITC)--which expires at the end of 2008--for another eight years.

With strong public and business support, you'd think that the ITC would sail through Congress, as it indeed has in the House of Representatives several times already. Yet so far, bitter, election-year partisan wranglings--with Democrats and some Republicans supporting it, but a determined group of Republicans opposing it in its current form--have derailed efforts to approve the extension.

During his excellent overview of the market context of CSP at the "Concentrating Solar Technologies and Markets" conference, industry pioneer and Abengoa Solar US adviser Fred Morse painted a bleak picture of the prospects for the US solar sector if the ITC fails to win approval. In listing the factors standing in the way of the next wave of concentrating solar power technology development and installations taking off, he cited the US Congress's failure to pass the ITC extension as the biggest obstacle, surpassing the admittedly challenging aspects of cost, power transmission, land use, permitting, and environmental concerns.

"Why would the guys in DC rather play politics," he railed, "than address the country's renewable energy resources?" Later in his talk, he continued his plea, saying "the lack of an ITC extension is killing solar," noting recent layoffs and a lack of new hiring, with several gigawatts' worth of projects on hold as companies and investors hold their breath awaiting the extension's future.

During the Q&A, he said the ITC is "worth 2 to 3 cents per kilowatt-hour, and that's alot," adding that although he'd like to see the credit made permanent, that with the "right carbon policy and an eight-year extension," the time span would probably be enough to move the industry beyond the point of needing the policy (although he didn't specifically use the grail term, "grid parity"). He also called on the states to do more in areas such as renewable portfolio standards and manufacturing tax credits, whether the ITC is extended or not, and proposed the establishment of a feed-in tariff as another part of a strong US renewable energy policy.

During the SEMI press conference, Vicki Hadfield, the trade organization's president for North America, stated the group's strong support for the ITC extension, along with a permanent R&D tax credit, more federal spending on NSF and NIST, an increased cap on H-1 visas, free trade and open markets, and other parts of its election-year wishlist. When I asked her about the prospects of the ITC passing and its possible effects on the industry, she said, "we believe it will pass, maybe not this week; if not this week, then in the fall. There is huge support for it... The key is finding offsets."

I followed up with Maggie Hershey, SEMI's senior director of public policy (AKA lobbyist) in DC, who reminded me of Navigant Consulting's grim forecast of 116,000 domestic jobs lost and a $19 billion investment hit in 2009, and the negative "ripple effect" beyond that, if the ITC is not extended this year. But she reiterated Hadfield's remarks, expressing confidence that the extension will indeed be passed later in the year, despite the current "difficult, tense point" hindering compromise efforts.

She believes that if the ITC is framed more in a "stand-alone package," less entangled with other tax-extender bills (and "things are shaping up that way," she says), then it should pass the Senate, be conferenced with the House and approved, and that the resulting version sent to the White House would not be vetoed by President Bush. But if it passes in a package with some other, more controversial "offsets" or "pay-fors," a veto could happen, she thinks.

Hershey said the thinking on Capitol Hill these days is that there will be no post-election sessions of Congress. But "the appropriations process has completely broken down," so many people don't expect the legislators to finish their allocations work. "So if they don't do it [extend the credit] before the election, they may no do it at all" until next February or March. This scenario underscores Hershey's belief that the ITC extension must and will be passed before the current session ends in early October.

There are other factors at play in the backrooms and chambers of Washington, as there always are, which could throw a wrench in the solar array, and the intricacies of public policy are not my ken. I also don't trust President Lame Duck to do the right thing (which has never been his strong suit), especially when it comes to anything with the faintest tinge of green and clean--even if it makes good business sense and is, as far as I can see, absolutely critical to the future prosperity and health of this country.

But Hershey's--and SEMI's--guardedly optimistic viewpoint, buoyed in part by ever-increasing citizen pressure on the DC pols, offers hope that the ITC will be properly extended, and the US solar industry will quickly start to achieve the gigawatt-scale dreams that the concentrated wisdom of experts like Morse believe are within its grasp.

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