The rapidity of change in the solar sector (both distributed and concentrated photovoltaic) can perhaps best be measured from the first sentence of the “Introductory Note” found in a July 2008 National Renewable Energy Laboratory report on the concentrated photovoltaic power industry:
“From the time this study was started to the time the report was completed, some of the details were already out of date”
Breathless headlines in just the last couple of days bear this out (all worthwhile reading by the way):
Building-integrated Solar Market Ready to Explode
Solar PV Builds Momentum Across Europe
Over the next few months, as part of NRDC’s Center for Market Innovation, I plan to blog consistently on the far-reaching and ever-changing developments taking place in the solar industry. The structure of posts will evolve over time, but I expect to highlight the most important news items, while drilling down into several core challenges, among them financing, pricing, policy and supply. Unsurprisingly, these issues tend to be related.And so with that, I’ll briefly cover a couple items that I’ve come across recently:
Senate may take another shot on tax extenders (subs. required)
Much attention has been paid on the U.S. side towards extending important solar and wind tax credits (the production tax credit for wind and the investment tax credit for solar) that are set to expire at the end of this year. In the past, the expiration and delayed extension of these credits has resulted in distressing boom/bust cycles in these sectors, and given the resurgence of global interest in these technologies, the U.S. would do well not to fall further behind (in terms of installations, investment and technology development).
In general the PTC (at 1.8 cents/kwh) has been useful in boosting onshore wind development, and the ITC (30% credit on cost of system) has been helpful in increasing some forms of solar installations. Commercial PV installations have benefited most, as they face no cap under the ITC, and commercial entities can typically find a way to take advantage of all the tax credits. Unfortunately, the residential portion of the ITC is capped at $2000. This is too low for all but the smallest PV solar systems. Capping the ITC at $2000 further ensures additional incentive mechanisms (e.g. rebates, additional tax incentives) are necessary for the time being.
Regarding the article above (subs. required):
Senate Democrats are poised to make yet another attempt to move a renewable energy tax package next week, as Senate Finance Chairman Max Baucus (D-Mont.) last night unveiled a new version of the legislation with several sweeteners designed to pull over GOP votes.
The modified version of the $123 billion bill makes no substantial changes to the energy provisions of the tax package, with most of the changes involving the inclusion of a series of items that are generally popular with lawmakers
….
…the bill extends for one year the renewable production tax credit for wind facilities and for three years for facilities such as biomass, hydropower, geothermal and others. The legislation caps the tax credit that can be earned at those facilities at 35 percent of the facility's cost.
The legislation also extends for eight years the 30 percent investment tax credit for solar power and the 10 percent investment tax credit for combined heat and power systems. And the bill extends for eight years the credit for residential solar property and increases the annual cap to $4,000.
The American Council on Renewable Energy has created a useful site collecting various supporting documents in favor of extending the tax credits. GE (which has strong positive exposure to wind) has put together an analysis of the net-positive federal tax value inherent in wind, while Navigant has the counter job/investment loss argument if tax credits are not extended. Both studies are accessible at this site.
There have been a number of attempts this year to pass some version of tax credit extensions, but partisan back-and-forth has scuttled previous efforts. One key challenge in the House has also been finding revenue to pay for the extensions (as the House operates under “pay-go” budget rules). The new version finds offsetting revenue by changing the tax treatment for hedge fund managers and multi-national corporations (more here). Passing this bill in the House, and a version in the Senate remains challenging.
Solar Fact Finding Mission to Germany for Utility Decision Makers Summary Report:
I recently came across this interesting read - highly recommended. The Solar Electric Power Association (SEPA) and World Future Council organized a trip allowing 20+ U.S. utility executives to visit a variety of German utilities, installations, companies, etc., to learn more about the German PV solar and Feed-in-Tariff (FIT) experience. The learnings are summarized in this document, although if you’re pressed for time, the executive summary (pg. 2-4) is still worth your time.
It provides a good overview of the on-the-ground situation in Germany, including their cost of their FIT and the nature of their utility renewables initiatives. Especially interesting was the fact that grid integration has not been an issue for German utilities. Among those utilities with a relatively high solar presence (2%-3% generally, ranging up to 20% on sunny days), utilities reported that this level of solar caused no grid problems.
Also, the report provides a number of interesting facts and numbers on the German FIT strategy. It seems, as perhaps would be expected, that the FIT encourages specific patterns of renewables deployment – namely smaller projects, increased local and community engagement in projects, and multiple investors on individual projects. Overall costs for the FIT remain contained, amounting to anywhere from 2%-6% of a customer’s average electricity bill, while the FIT itself has engendered a strong renewable manufacturing base in Germany and growing amounts of renewably-generated electricity being supplied to the grid (up to 14%)
As always in this space, much, much more to come…