Senate May Kill Solar Rally

Solar stocks have been rallying on reports that the House this week will approve a bill that includes extensions of tax credits for renewable energy sources such as wind, solar and biomass. And while it does appear likely that the measure will pass, there is reason to believe it will get killed off in the Senate in its present form.

Erik Olbeter, a Washington-based analyst with Pacific Crest, writes that enthusiasm for the bill is “misplaced,” and represents “a significant negative” for efforts to pass the tax credit package. “Industry representatives and lobbyists were hoping for a much better bill that might be able to muster Republican support in the Senate,” he writes. “This is not that bill.” And he says failure to win passage is a negative for solar companies with exposure to the U.S. market - he cites SunPower (SPWR) and Akeena Solar (AKNS) specifically - and for major wind turbine manufacturers, such as Denmark-based Vestas.

Olbeter says the House Ways and Means Committee will unveil today a tax package that would extend and expand renewable tax credits and reinstate the R&D tax credit. The bill would pay for itself by closing tax loopholes, “including one that allows fund managers to defer taxes on compensation earned from offshore funds and another that would allow multinational firms flexibility in allocating global interest expense.”

Olberter contends that the bill “has virtually no chance, in its current form, of becoming law.” He says the tax loophole closures “are a nonstarter with Senate Republicans and the White House, which opposes taxes generally and these measures specifically.” Olberter says the House is likely to pass the bill along party lines, possible before Memorial Day, but that Senate Republicans will kill the bill it if comes to a floor vote.

Olbeter says this is likely the last meaningful attempt by the Congress to pass extension of renewable energy tax credits before November; he predicts that the solar and wind credits “will probably lapse on December 31.”

Propelled at least in part on investor optimism about the bill, many solar energy stocks are higher today; SPWR is up $5.42, or 6.1% to $94.42, while AKNS is up 50 cents, or 9.4%, to $5.81, though both have started to drop just before market close.

Comments

[David Lentz:]

It seems that the major negative to the proposed bill is its attempt to pay for itself by closing tax incentives (a.k.a. "loopholes"). Apparently just blind tax-cutting is the only formula for passing legislation these days -- that, and local application of pork to keep the sheeple happy.

One would (desperately) hope that the days of cutting taxes while increasing spending are behind us -- but it seems that the drunken party inside the beltway continues at full tilt.

2008 May 15 11:21 AM

[EnergyFinan...:]

Despite the uncertainty of the Production Tax Credit, investors and financiers have increased their focus on renewable energy--especially solar. Certainly, if the PTC can be renewed, this would ensure future investment, lower prices, and increased consumption of renewable energy.

If you're interested in learning more about the economic and policy factors fueling renewable energy growth and development, you should attend the Renewable Energy Finance Forum-Wall Street, held June 18-19 in New York City. One of the official event sessions will feature representatives from the Institute for Sustainable Energy Policies, the Stella Group, Lazard Freres & Co, and New Energy Finance in a discussion about the world energy trends, policy developments, and economic factors influencing renewable energy finance.

For more information, visit www.REFFWallStreet.com.

2008 May 15 11:43 AM

[solar jim:]

FSLR is already looking at nonsubsidized markets that they can compete in right now and make a profit. While the tax credit would help expand business and scale at a faster pace it will happen nonetheless although at a slower pace to grid parity if it does not pass. The U.S. isn't the only market either. The other markets in the world as well as individual states (ie CA) have enough incentives in place for enough years under already passed law to allow at least a couple of the solar players to expand capacity and the market to a size that they can compete without any subsidy anywhere in by 2011-2012, if not sooner. And that's without considering the passage of some sort of tax on carbon making all current cheap energy not cheap anymore with a future McCain/Obama/Clinton administration as they all are on the global warming bus together.

2008 May 15 08:40 PM

[Steven Ward:]

I'm wondering when a "new " Congress will adopt Hillary's illogic about taxing "windfall" profits on oil companies for subsidies for solar and wind alternatives.

Over 80 percent of the crude in this country is used for transportation and chemicals, not power generation. Yet Hillary alludes this how we will gain control over gasoline prices.
Looks like the coal companies have completely dodged the tax bullet. I find that interesting.

2008 May 16 12:27 PM