Solar Moving Forward Despite Low Subsidies

Despite relatively low subsidies, especially in comparison to the subsidies awarded to other energy sources, solar has been making it’s way as a valuable source of energy .

Incentives Graph

Graph Used From Baker Report and Think Progress .

The federal government provides incentives for every major energy production market and they exist to bridge the “chasm” between early adopters (about 16%) of a certain market and the majority adopters (about 84%). Crossing the chasm doesn’t necessarily mean all companies in the industry succeed, but that the industry itself succeeds. To get from initial adoption to full scale implementation, federal incentives support new energy resources on average for 30 years, including market control for oil, pipeline availability for natural gas, and dams for hydropower. Incentives provide economies of scale in a long term scenario that offer stability during the adoption process with gradual reductions in incentives as the industry matures.

Solar is at the chasm where continued government incentives are critical in assisting the jump between adoption phases. As it is, incentives for solar have been small compared to fossil fuels, according to a report by the Baker Center, “federal investment in solar technologies has been modest in a long-term histroical context relative to other energy technologies”. But, the incentives solar has received have really aided the industry. The growth of solar over the past two years has come with the federal investment tax credit and state renewable energy standards set in place. In addition to the decreasing PV prices, there’s been a 77% growth in the last 5 years.

This growth is spurring innovation, which in itself stimulates growth. Growth means more opportunity for jobs–the Baker Report estimating between 200,000 and 430,000 direct, indirect, and induced jobs coming from the solar industry by 2020. There are already 100,000 Americans working in the solar industry. To top it off, solar provides more jobs per megawatt hour than any other energy industry.

Solar has huge potential in the U.S. Rooftop solar alone could provide 20% of America’s energy needs, which would help decrease impacts of price and supply vulnerabilities from fossil fuel supplies. Solar could be an important addition to the American energy portfolio, but continuing incentives will be a crucial factor in perpetuating this.

Incentives are used to move an industry up the adoption curve. Solar has come this far despite relatively low subsidies; imagine what it could accomplish if the federal government channeled incentives usually given to the fossil fuel industry into solar.


Solar Wars

Solar wars might not be terribly riveting to the average American, but it’s definitely something solar manufacturers and installers are keeping tabs on.

An invasion of inexpensive solar panel imports from China are sparking mixed reviews from the U.S. solar industry. On the one hand, parts of the industry say the cheap panels are creating a solar boom in the states. On the other hand, panel manufacturers are concerned because its hurting their businesses, and want a tariff attached to the imports.

SolarWorld’s Gordon Brisner argues that China’s threatening SolarWorld’s underlying principles, “to build products here in America, for America’s community, for America’s energy independence, and really leave the world a better place.”

By flooding the market with cheap panels, Brisner argues it’s contributed to the collapse of some U.S manufacturers. Brisner has petitioned the U.S. Department of Commerce and the International Trade Commission to tie tariffs to Chinese panels to level the playing field.

Though most people agree that American panel manufacturers have indeed been harmed by Chinese imports, it remains to be seen whether or not there’s any illegal activity occurring–in which case a tariff would be justified. “Dumping” refers to a foreign producer selling a product in the U.S. at a price that is lower than the cost of production, or subsidizing panel manufacturers so they can sell below the average price.

A tariff would indeed rise the price of solar, causing concern with the Coalition for Affordable Solar Energy  (CASE) who says higher prices will hurt solar installers–whose numbers outweigh the number of U.S. manufacturers.

Kevin Lapidus vice president of SunEdison and worker at CASE argues that we’ve just gotten to the point where solar’s reputation of being too pricey for regular people is being let go, and imposing a tariff will set the industry back by years.

Though some people who go solar are interested in buying American made (like SolarWorld), most are just looking for the best price. With Chinese panels running about 10% cheaper, they’re a popular choice.

Imposing a tariff could come with potential consequences, a trade war with China, higher panel prices hurting installers, a ripple effect throughout the solar industry if there are less installations. But is establishing a “made in America” industry worth it?

A big push behind solar energy (and renewable energy in general), is not only to be less fossil fuel intensive, but to stop importing foreign oil. Establish energy independence.

Of course, I think some solar is better than no solar regardless of where it comes from, but aren’t we contradicting ourselves a bit if our aims are to achieve energy independence if we’re importing solar panels from a foreign country? Would it be worth it to pay a slightly higher price for solar panels if it meant keeping jobs and manufacturing at home instead of abroad, if it meant actually achieving energy independence instead of shifting our dependence to another country?

Over the next few months, the federal government will decide if China is playing by the rules, or if a tariff on Chinese panels should be imposed.


The Creation of a Unified Solar Front

Last week the Solar Energy Industries Association (SEIA), the national trade association for the solar energy industry, announced its merging with The Solar Alliance, a state focused group allying solar manufactures, integrators, and financiers and establishing solar policies and programs at the state level. The Solar Alliance will now be operating under the SEIA brand in order to present a unified solar front in all state level matters regarding the solar industry.

As president and CEO, Rhone Resch commented, “The solar energy industry is expanding and it is critical for SEIA to mirror this growth and put our resources and expertise into developing state policy that expand markets for solar energy.”

SEIA has also been establishing collaborative relationships with a handful of state and regional SEIA chapters to create partnerships (though independent entities) to bring to the table additional resources that mirror SEIA’s goals.

Resch added, “The focus on state-level policy allows SEIA to speak as the voice of the solar industry in all government arenas.  We have important work to do to ensure solar energy has access to energy markets across the country and that solar is cost competitive in all 50 states. This is a major step in that direction.”

By presenting a unified front, SEIA is hoping to address policy issues ranging from international trade, to extending the 1603 Treasury Program while targeting state policies including net metering, and addressing barriers for grid interconnection and permitting.

Hopefully this merger will work to remove the barriers that have kept solar from becoming a mainstream form of renewable energy by strengthening the industry at not only state levels, but federal as well.

Could Vanishing Tax Credits Dismantle Green Energy?

It would be nice to believe that people take steps to greening their homes for the sole purpose of bettering the environment and not because of financial gain.

Solar Panel Installation

Unfortunately, the evidence is indisputable: more people go green if they get a tax break.

Federal tax incentives play a huge role in jump starting green energy movements. Now, there’s a good change they’ll be cut back, or scraped completely which could have disastrous consequences for energy efficiency progress. For instance, this year, residential tax credits for energy efficient doors, windows and appliances was cut from $1,500 down to $500 ending with a 16% decline in the sale of windows and doors. This incentive–along with a $2,000 dollar credit for builders to construct homes that use 50% less energy than the original standard–is set to expire at the end of this year.

Even if Congress extends these, energy incentives are at risk, especially if Republicans gain control of the White House in the 2012 elections as, “The classical conservative position is that credits and incentives for renewable energy or energy efficiency are not good policy,” says Clint Stretch, director of legislative affairs at Deloitte & Touche.

Many of the Republican presidential candidates have plans to decrease or eliminate tax credits, setting an ominous precedence for renewable energy. According to Stretch, even if President Obama is reelected, “there is still going to be a push to take incentives out of the tax code in the context of tax reform.”

It is difficult to measure the effectiveness of energy tax incentives. For instance, is the 30% credit for solar energy installations provided by federal government the reason why solar installations have exploded 800%? Or is it because solar energy awareness has increased while the cost of solar panels has decreased?

Furthermore, tax incentives are currently structured so that some tax payers may receive a credit where as others might not. Many businesses weren’t able to take advantage of the 30% credit for solar system installations because they had no profits to show with the current economic climate–and businesses must claim the tax credit against profits. To alleviate this problem, Congress allowed businesses in this position to get a grant instead of credit, though this too expires at the end of the year.

84% of energy production in the US still comes from fossil fuels with only a sad 8.2% of energy coming from renewables. It seems if the US is actually interested in moving along the path of energy efficiency, nixing energy efficiency tax incentives is a bit preemptive and may seriously divert the potential of transitioning to green energy.

For more information, check out the article in The Fiscal Times.