First Solar CEO: Tax Credits Alone Not Enough to Win Over Customers

By Ucilia Wang

First Solar (FSLR) CEO Michael Ahearn said Wednesday his company is in good shape to weather the financial market crisis but warned that the potentially higher cost of building solar power systems could lead to a "dramatic effect on the cost of electricity.

Ahearn spoke on a Solar Power International conference panel with executives from Duke Energy (DUK), SolarCity and Abengoa Solar (ABGOF.PK) and discussed a variety of topics that ranged from building a new grid to problems consumers and utilities face in making sure they get what they pay for.

The impact of the credit crunch and worsening economy was the top question posed to the panel. Ahearn said the Tempe, Ariz.-based First Solar has built a good business selling its thin-film panels to Europe, where strong government incentives have made Germany and Spain the two largest solar energy markets in the world.

Ahearn also pointed out that the cost of solar electricity is closely tied to the cost of engineering and installing a solar energy system, whether it's for a utility or a homeowner. As a result, the faltering economy and the credit crunch could increase the cost of setting up a solar power system for utilities or consumers.

"You can't continue like this for very long," Ahearn said. "There is a potential higher cost of the capital, and we will have to see what impact it will have. It's hard to say."

He said the recent passage of tax credits for utilities, businesses and homeowners to develop and install solar energy systems will make it easier for companies like First Solar to expand its reach in the United States.

In fact, the tax credits, which Congress approved earlier this month and will take effect in January, might change who develops and operates solar power plants in the utility market, Ahearn said. For the first time, utilities can use the tax credits, which will give them the incentives to develop power plants themselves.

Currently, utilities sign contracts with project developers – some of them solar equipment makers – to buy electricity from solar power plants that will be built, owned and operated by the developers. The model is cheaper for utilities, many of which have to meet state mandates that require a certain percentage of the electricity sold to come from renewable sources.

"We might see a whole-sale shift, from [the power purchase agreement model] to utility retained generation. That could make a certain amount of sense," Ahearn said.

Lyndon Rive, CEO and founder of Foster City, Calif.-based SolarCity, said educating consumers about the benefits of tax credits, which will cut the solar energy system cost by 30 percent, will be key in persuading consumers to invest in solar during the economic downturn. Convincing banks to loan money to solar energy system installer such as SolarCity also will become tougher.

"The banks are being more strict on businesses plans and execution," Rive said.

Rive said another problem that installation and service company like his faces is a lack of standards to assure consumers that they are getting their money's worth.

Without some metrics, consumers have a hard time distinguishing among a slew of solar energy service companies that have emerged in recent years.

"We have to step out and guarantee what the production is going to be, and you have to be there to support it," Rive said. "It will eliminate fears from consumers."

Ahearn said no good policies exist that encourage accountability from solar power developers carrying out million-dollar projects to sell energy to utilities. The same issue also happens in the residential solar market, he said.

"There is no policing around the quality of offers. If you look at the warranties today, it will be difficult for consumers to understand where there is a claim proven and who's responsible," Ahearn said. "You can get wide-spread disappointment over time, and it will come back to bite us."

Comments

[Gumby:]

If you are worried about the costs of solar energy installments today, you are not worried about the cost of fossil fuels ten years down the road as a result of your apathiness toward solar energy. We are so near sighted... Dont we know that we can reduce future demands of fossil fuel as we contnue with our solar energy installments. As of now, our solar industry as a whole is capable of producing less than ten gigawatt-hours of electricity a year which is not enough to be measured against the much bigger fossil fuel based power generating installments already in place by an order of one to one thousand. Utilities who pass off solar installments may be disallowed from passing along rising fossil fuel costs for generating electricity ten years down the road if necessary. It is not about profits, it is more important to control the future costs of fossil fuels ten , twenty , thrity years down the road.. We have a big job to do and we are still fretting over the costs of solar energy today, duh? Are we still so blind to the value of the intangibles???? This is where capitalists fail so miserably repeatedly........Thsi is where socialists shine!!

2008 Oct 16 10:59 AM

[Gumby:]

Someone from Big OIl is sticking a gun behind First Solar CEO ' s head telling him to downplay anything solar until oil prices rebound to $150 barrels , so that the investment houses like Goldman can make a killing in both...

2008 Oct 16 11:45 AM

[Gumby:]

Or General Electric 's windpower operations dont want any competitors from the solar arena and is sticking a gun behind First Solar CEO's head!!! Wind power is killing birds of prey by thousands every night....

2008 Oct 16 11:46 AM

[Gumby:]

First Solar will grow to about one gigawatt hour production per year in 2009. Meanwhile, the world is planning 300 gigawatt hour yes 300 times as big as First Solar in new additional coal-powerplants in construction over the next couple years and will require one billion additional tons of mined coal on top of already one and half billion tons of coal mined annually globally. it is not even counting dozens of new nuclear powered generators under construction globally. Also oil and natural gas power plants.. Our alternate energy program is so slow like a snail trying to catch up with the gang! You ever wonder how much tax credits will be required to be given to solar and wind installers to match power generation of those fossil fuel powerplants already in construction over the couple years. We will require maybe one thousand times as much tax credits to grow solar and wind power construction as we do with fossil fuel power constructions.. We cannot afford alternate energy program in any big way... It will be just a token to make you feel good !!! We will continue to warm the global climate and melt all the ice in the polars, sorry about that... you thought tax credits is far more important than polar bears... your sense of priorities is all messed up!~!

2008 Oct 16 12:11 PM

[Gumby:]

you from the green movement keep trying ... better still... place your bets on First Solar with your own wad of dollars and stop fretting about tax credits .. go save polar bears NOW!! forget about tax credits... Polar bears dont have time for tax credits to come by... They are drowning as you are moving on....

2008 Oct 16 12:14 PM

[Gumby:]

There is a need of one thousand times more capital flowing into alternate energy programs be it tax credits or YOU AS INVESTORS!! Dont worry about losing money,,, DO WORRY ABOUT LOSING POLAR BEARS NOW!! ARE YOU WORRIED ENOUGH YET TO PART WITH YOUR WAD OF DOLLARS TOWARD ALTERNATE ENERGY PROGRAMS OR WHAT?? One third of our animal kingdom is going EXTINCT! TEN TRILLION DOLLARS POURING INTO ALTERNATE ENERGY PROGRAMS MAY BE A REAL BARGAIN AS FAR AS OUR BELOVED WILD KINGDOM IS CONCERNED... IT IS PRICELESS!! WHAT IS A FEW TRILLIONS BURNING OUT OF YOUR POCKETS?? SO WHAT ! BE BROKE AND HAPPY ! FLEX YOUR POWER! FLIP OFF SWITCHES AND BUILD ALTERNATE ENERGY LIKE FAST NOW! I COMMAND YOU NOW! YOU MUST OBEY ME!@

2008 Oct 16 12:17 PM

[Gumby:]

take cash advances out of your credit cards and invest in solar and wind power stocks!!

2008 Oct 16 12:19 PM

[whocouldshebe:]

They should allow tax havens for clean energy investments as they do with public works. Every investor would flock to solar, wind, and water for the tax break. Also, put more tax on anything non-green but big oil completely controls the world now that banks are out of the picture. I doubt we will ever see an oil company loose money in our lifetime, so no matter how hard you all try, without major changes to attract the world's investors, clean energy is always doomed to fail.

2008 Oct 16 05:19 PM