Visiting the warehouse of fast-growing residential solar installer SolarCity last Friday in Foster City, California, the first thing I saw was a big bucket of champagne on ice. There were high-fives in the hallways -- a scene no doubt repeating throughout the offices of solar, wind, biomass, geothermal, and energy-efficiency technology companies across the United States. After 10 months of teeth-gnashing, it's finally time to celebrate. Congress, as part of the bailout bill, finally extended the federal renewable energy tax credits.
Solar power's investment tax credit (ITC) got an eight-year extension, while the production tax credit (PTC) for wind, geothermal, and biomass generation facilities got just a one-year extension. Nonetheless, even one year gives the industry critical breathing room, with the strong possibility of a much longer extension next year from a new Congress and administration. And any extension is obviously much, much better than the worst-case scenario that the industry had faced: the credits' expiration at the end of the year. "The whole industry was at risk," said David Arfin, SolarCity's VP of customer financing.
It's hard to overstate the importance of the ITC and PTC (each a 30 percent credit) for the health, expansion and future of America's clean energy industry. When fast-growing companies like SolarCity, SunEdison, and MMA Renewable Ventures create financing packages to pay for residential and commercial solar rooftop installations, tax credits are a critical hook for their investors. The same holds true for financing big wind farms. Energy industry consultants at Navigant Consulting predicted that investment in U.S. wind and solar alone would fall from $26.6 billion this year to $7 billion in 2009.
Even better news: beyond renewing the existing credits, the complete legislative package includes new provisions such as eliminating the $2,000 tax credit cap on residential solar systems, which had limited the size of some installations; an authorization of up to $800 million in federal bonds for clean energy systems; and a new ITC for the nascent but buzz-filled wave and tidal power sector. The package also includes an ITC for residential wind turbines and for the first time, allows utilities to use the solar ITC -- a provision that Clean Edge, the research firm where I'm contributing editor, called for in our Utility Solar Assessment (USA) report back in June. The large-scale deployment of solar by utilities is critical for the industry to really take off in the U.S.
And a quick aside to those 'free-market' advocates who might grouse that wind and solar "need to stand on their own two feet without subsidies": show me one single energy industry sector without them. The clean energy ITC and PTC are a drop in the bucket compared to the billions given annually to the oil, coal, natural gas, and nuclear power sectors -- all much more mature industries than clean tech. A truly free market for energy doesn't exist and never has; I would love to see renewables like wind and solar given the chance to compete on a purely level, subsidy-free playing field.
Many on Wall Street are breathing easier this week because of the bailout passage, but no one is more relieved than the clean energy industry. Clean tech didn't need a bailout -- it's one of the few sectors of the U.S. economy enjoying rapid growth and job creation. But much of that was about to come to a screeching halt before Friday's vote. The tax credit extension at least keeps that momentum going into 2009, when it will be time for a new administration to put its full weight behind a comprehensive, nationwide policy supporting U.S. clean-tech expansion and job creation. Now that will be cause for celebration.