From the Wall Street Journal:
For the solar-power industry, it was the best of times and the worst of times—all in the space of a long weekend. On Friday, after the passage of the Wall Street bailout bill that included juicy tax breaks for solar power, champagne was the order of the day. By Monday, as stock markets went south and some of the implications of the new tax breaks sank in, solar companies expecting to cash in saw their prospects turn as gloomy as anybody’s.
Optimism reigned on Friday after Congress and President Bush inked an eight-year extension to clean-energy tax credits which should help solar power especially. The new law gives homeowners serious help in installing their own solar-power arrays, and for the first time opens up the tax credits to power companies.
The combination was meant to herald a new era of big solar-power rollout. Or, as Lyndon Rive, chief executive officer of SolarCity in San Francisco, told The Wall Street Journal: “The solar industry has been waiting 30 years to be able to offer parity with grid prices. Now we’re able to offer it.”
Headwinds in the rest of the economy—and some potential impacts from the new law—appear to be to blame for the sector’s woes. Now that homeowners can finally get tax breaks for 30% of home-solar installations—breaking down hefty upfront costs, one of the biggest barriers to solar power—the credit crunch means homeowners are struggling to land loans to cover the other 70% of the cost of installation.
And now that utilities can take advantage of the tax credits, the solar-power lobby expected a rapid explosion of big solar-power installations. Under the old law, power companies had to buy solar-generated electricity from independent developers.
That could be a mixed blessing for the companies that make solar-power gear. Many were already rubbing their hands at the prospects of huge sales to utilities that need to build large-scale solar projects to help meet local requirements to generate clean electricity.
But utilities’ financial muscle could also mean they drive a tough bargain on prices. As Dow Jones Clean Tech Insight (sub reqd.) reports, many power companies are already flexing their muscles: “Suntech Power Holdings Co. said that the price that Southern California Edison said it would be willing to pay is more than 20% lower than the market level.”
The prospect of losing pricing power dovetailed with another Black Monday on Wall Street; amidst the overall market carnage, solar companies tanked. Companies such as Suntech Power Holdings, First Solar, Trina Solar, and Solarfun all lost more than 10%.
Clean energy may yet have its day in the sun—but as long as the financial-market turmoil lasts, it isn’t going to be an easy ride for anyone.
Richard Pace 