Making Sense of Solar and Federal Politics
Solar energy is no different than any other energy in only one way; at face value it costs more than homeowners and businesses can afford. In fact, all sources of energy, whether they are oil, coal, gas or nuclear have benefited from federal subsidies for decades in some shape of form in order to bring down the cost and make them affordable (or somewhat affordable) to the general public. Some subsidies are not direct incentives but nevertheless they are present. For example, construction of transmission lines to coal-fired power plants were built with tax dollars and tax incentives are offered to drill for oil and research funding for nuclear power.
The U.S. solar market remains driven as much by state-level market dynamics as it does by pricing and supplier competition and is directly related to government intervention. That doesn’t mean the industry is weak; it’s merely the name of the game. The government has always played a critical role in the energy mix. In actuality, the solar industry receives a minuscule amount of help in comparison to the competing energy big guns. If the playing field were made even, the solar industry would soar (even more)! Unfortunately, instead of raising the bar, the few federal programs that the solar energy industry is benefiting from are now in jeopardy.
To break it down, here are the three critical programs on the federal level:
• 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 percent of investment in energy production using solar electric, solar hot water, fuel cell or small wind methods.
Set to Expire – December 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 (ITC) 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.
Set to Expire: December 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.
Set to Expire: September 30, 2011 (to receive funding, solar projects must begin construction no later than that date)
The Loan Guarantee and the treasury grant programs are set to expire toward the end of this year. If Congress doesn’t renew each of these programs, the solar industry will undoubtly suffer a tremendous blow. The House has been hell bent on slashing federal spending and philosophically opposed to subsidizing solar power and clean energy. While President Obama has advocated for a clean-energy standard, the House conservatives are trying to eliminate federal programs that offer grants and loan guarantees to the solar industry and other renewable-energy industries.
Aside from the obvious advantages that solar power brings to the table, such as a clean environment for our children, energy independence and a bountiful homegrown resource, there is much more to focus on. After all, in today’s economy, if jobs are being created and work isn’t being done to stabilize the economy, there is little point in looking toward a blissful future. At least, I believe that would be a typical politician’s view, and when it comes to federal programs, politics rule.
Check in tomorrow for a look at how the solar industry is paying off. (Subscribe now for a reminder!)