What a Difference a Year Makes — Or Does It?

Last year at this time I was just getting my knees back under the desk after a trip to the Solar Power Conference and Expo in Long Beach, CA. The renewable energy industry was gearing up to intensify its lobbying of Congress for extensions to clean energy tax credits into 2009 and beyond, and the general mood at the solar show was that prospects were good for the industry, so long as the tax credits were extended in the hugely important upcoming Congressional Energy Bill vote.

That was in October 2007. And sure enough, in December of that year the all-important tax credits were dropped from the energy bill signed by President Bush…

As 2008 ground on, the above phrase-the all-important tax credits were dropped-was summoned again and again from the clipboard whenever tax credit extensions appeared on the Congressional block. It turned out to be not an auctioneer’s block but an executioner’s, and at times you’d have thought we were reliving the French Revolution, so frequently was it used.

Finally, as you probably know very well, the much-abused tax credit extensions were slipped into the wildly controversial economic bailout bill and virtually smuggled through Congress, along with tax breaks for makers of wooden bows and arrows for children. So ten days later, as Governor Schwarzenegger opened this year’s conference and expo in San Diego, I was looking around the opening plenary session room for the complimentary champagne table.

Well, the table was there and the drinks were free, but the bubbly tasted suspiciously like Tab. And that, I understand, was not just because it was too soon after the Congressional action to see results but also because our suddenly parlous economic situation has acted as a banana peel under the feet of some of the players in the solar industry.

Tom Dyer, SVP of Marketing and Government Affairs at Kyocera Solar, Scottsdale, AZ, puts it this way: “The ongoing credit crunch is threatening to dilute the growth we’re looking for-not because companies like Kyocera are looking for credit and can’t find it, but because of what’s happening downstream.”

Dyer is referring, of course, to customers of Kyocera’s solar electric products, most of whom are installers of solar systems. These are the firms that are looking for sources of credit to accommodate the expected increase in demand from end users. And those very end users are themselves looking for loans to help them take advantage of the recently enacted tax credits. Until financial markets settle down and show some stability, Dyer explains, these links in the purchasing chain won’t be able to play their part in growing the solar market at the rate it should enjoy. It’s more likely, he feels, that growth will first be seen on the utility side, where a total of 1.5 gigawatts of solar, both PV and CSP, is projected to be installed, starting in 2009.

The utility-leaning argument is borne out by Gerry Fine, president of Schott North America. Schott broke ground early this year on a CSP and PV equipment manufacturing plant near Albuquerque, NM. Fine now says the plant will be up and running by March 2009 and that he is already sold out for the first build. And while the plant will be producing both PV modules and concentrated solar receivers, he expects to build more of the latter in the initial phase.

Solarwrights, a Rhode Island-based installer with offices in New England and New York, might be one of those firms cited by Dyer as hamstrung by tight credit, except that Bob Chew, President, is seeing a sunnier side of solar right now. Solarwrights, a primarily residential installer, has just teamed up with Solar Works Inc., a mainly commercial installer in the same market area, to provide a more across-the-board offering. Chew’s sales force is busy revisiting those residential projects that had been put on hold in recent months with a view to restarting them for 2009 hook-up. And one project that has already been revived, much to his delight, is a 160-kW solar installation for Westover School in Middlebury, CT. He admits, however, that because of the credit crunch some creative financing on his part may be needed to make many of the on-hold projects happen.

“Now that we’re moving into a more competitive period,” says Chew, “I believe the winners will be those who are best at marketing themselves and delivering on their sales promises.”

The wind power industry received a mixed bag of candy from Congress, with a one-year PTC extension for big wind and a 30% tax credit capped at $4000 for small wind turbines through to 2016. A PTC extension of only one year is not what the wind industry has in mind when it looks for a consistent and predictable legislative atmosphere to attract investment; all the extension really does is keep the industry alive until a more enlightened Congress and administration address the issue next year.

The late and short-term nature of the PTC extension, together with the financially uncertain future, means a late start to big wind projects next year, according to the American Wind Energy Association (AWEA). In its 3rd-quarter report issued on October 22nd, AWEA notes that 2008 will mark the fourth consecutive year of record wind capacity installation, but that is not expected to continue next year. And Randall Swisher, executive director, points out that project scale will make big wind more vulnerable than solar to a paralyzed financial system.

“The likes of Lehman Brothers and Wachovia were investors in big wind,” says Swisher. “And look where they are now. In the last few years, we’ve had a lot of investors chasing just a few projects. That’s not true any more; the cost of capital has suddenly gone up. So it will be tough to get financing if your project isn’t very tightly conceived and costed out, and underwritten with a cast-iron PPA.”

So what can we say of the performance of the 110th Congress? In repeatedly postponing action on energy tax credits until they found a better use for them as a crowbar for levering an unpopular financial bill through the chambers, our Congresspersons did two things. First, they caused dire uncertainty and delayed growth in the renewables industry for more than a year. Second, they succeeded in extending tax credits at the very moment when industry’s ability to take advantage of them was compromised by the economic situation Congress had helped to create. It’s tough to paint our elected leaders as green in an environment of business as usual, as usual.

And yes, there is an upside, but not if you’re a day-trader. Everyone I spoke to talked in terms of “when (not if) financial markets stabilize,” and disagreed only on the number of months this would take. And as Mark Rodgers, director of communications for Cape Wind Associates, put it:

“Regardless of who’s in the White House next year, anyone proposing a power project will have carbon compliance to take into consideration. So when the dollars come back, whether from private investors or the government, they’ll come to the renewables sector first.”

So maybe I should have hung around the ballroom a little longer last week; the champagne was probably there, but hidden under the table until the Tab was all gone.


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