It's Official: Renewable Energy Tax Credits Here to Stay 5 comments
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By Ucilia Wang
It's official: The renewable energy tax credits are here to stay.
President Bush signed the mammoth bill containing about $18 billion in energy tax credits, part of a large tax package and financial market bailout plan Friday afternoon.
The signing came less than two hours after the House of Representatives passed the bill.
The House approved the energy tax credits after rejecting them only a week ago. The tax credits will go to businesses and residents who invest in renewable energy, from building and operating solar and wind power plants to installing small-wind turbines on residential properties.
The vote ended more than a year of bickering between the House and the Senate over extending the credits. Without an extension, the tax credits would have expired at the end of the year.
President Bush has said he would sign the bill.
"By passing this bill, Congress has finally given the solar energy industry 'policy certainty' that will attract investment, expand manufacturing and lower the cost of solar energy to consumers," said Roger Efird, SEIA chairman and president of Suntech America, in a statement. "This will allow companies like mine to move forward with expansion plans to serve the growing U.S. market."
The House agreed to the same energy tax credits it had rejected last Friday, when it mulled over the provisions along with a slew of other tax breaks for education, businesses and families, as well as relief money for hurricane victims in the Gulf Coast (see Senate OKs $18B in Tax Credits and Volleys Continues Over Renewable Energy Credits).
The entire tax package had come from the Senate. The House modified the package before voting for it last week because the Senate's version didn't contain enough revenues to offset the tax breaks.
The chambers had disagreed over tax breaks for fossil-fuel production. The House removed incentives for refineries to process oil from shale or tar sands – or make fuel from coal – provisions inserted by the Senate to win Republicans' vote.
When the House on Monday rejected a $700 billion plan to prop up the ailing financial market, Senate leaders saw an opportunity to push for the tax package again.
Senate majority leader Harry Reid, D-Nev., announced Tuesday night that the Senate would tweak the House's version of the financial-market bailout package and vote on it, but only along with the same tax package that included the incentives for renewable energy projects (read the entire bill here). Overall, the tax incentives approved by the Senate on Wednesday night are worth about $150 billion (see Senate Sends Energy Tax Credits Back to House).
The House voted for the tax package along with the $700 billion bailout plan on Friday because lawmakers feared "a global economic meltdown" if it rejected the bailout package again, The New York Times reported.
Tax deductions for U.S. oil and gas production will be delayed and reporting requirements for stock sales by brokers will be enhanced to pay for the energy-tax credits approved by the Senate earlier this week, and by the House on Friday.
The bill the House approved Friday calls for investment tax credits for solar developments for eight years. And unlike the current tax-incentive program, the new one will allow utilities to take advantage of the incentives.
The bill also includes production-tax credits for renewable-energy power plants that already are generating electricity. The legislation extends the production-tax break by one year for wind and by two years for solar, biomass and hydropower.
The bill opens up $800 million worth of bonds to pay for power plants using wind, biomass, geothermal, garbage and other sources, and doles out $2,500 to $7,500 rebates for drivers who buy plug-in electric cars and trucks.
Residents and businesses that want to install solar panels on their properties also would benefit from the bill, which extends investment-tax credits for eight years and eliminates the current $2,000 cap on the credits. The new program also will allow homeowners who install small-wind equipment and heat pumps to take advantage of the credits, but will cap the incentive at $4,000 for wind and $2,000 for heat pumps.
Some solar companies have said they wouldn't be able to build more U.S. power plants without the investment-tax credits (see No Tax Credit, No Solar Power and PG&E to Buy 800MW from Optisolar, SunPower). But whether a lack of tax credits would severely curb renewable-energy developments is debatable. Investors have continued to pump record amounts of money into solar, biofuel and other renewable energy companies (see Greentech Investments See Record 3Q).
Solar stocks from First Solar (FSLR), SunPower (SPWR), GT Solar, Evergreen Solar (ESLR) and Suntech Power Holdings (STP) were cresting ahead of the House vote, but some shares began to slide after the vote.
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This article has 5 comments:
Hedge funds are dumping stocks in mass because they got caught on the wrong side of the commodities crash. Many investors are in the "fetal position" waiting for this to blow over. Banks refuse to lend money to people with down-payments and 700 credit scores. And, the list goes on.
When this insanity stops (I guess mid 2009), solar stocks are going to take off. How can they not with US tax credits in full force. The US is the “800 lb gorilla” in the world solar market and now it is on track to pull the rest of the world with it. Grid parity here we come.
Hang in there solar investors. You only have about 9 more months until you can come out of the fetal position.
There's usually a many month economic delay in any action from the Federal Reserve so it will be 2009 before this hits the economy. But when it does, it will be big. And, solar companies projects will get the big funding they need. But in the meantime, solar projects will probably be adversely affected by project funding problems. Look for delays.
Solar: Goldman Turns Cautions; Fears Over Supply; Spreading Concerns On Impact Of Tight Credit
Posted by Eric Savitz
Solar stocks are trading sharply lower this morning after Goldman Sachs analyst Michael Molnar declared he has become cautious on the solar group, “as less generous subsidies combined with a wave of supply pose a real risk.”
Molnar asserts in a research note that the risk of oversupply in the solar market “will soon become a reality as considerably less generous demand subsidies take hold just as a wave of supply and tight financing hit the market.” He thinks that “liberal subsidies of the past in markets like Germany and Spain are unlikely to be replicated in the future givne fears of their ultimate cost in a bad world economy.”
As supply increases, he contends, prices will have to “adjust strongly downward to generate demand.” He thinks that trend will lead to below-consensus estimates for module manufacturers and compressed valuations for stocks in the sector.
Molnar today cut his rating on First Solar to a Conviction Sell from Buy, slashing his price target to $103 from $365. For SunPower (SPWRA) he goes to Sell from Buy, with a target of $43, down from $100. He also cuts his target on Evergreen Solar (ESLR) to $4.50 from $10.50.
He sharply reduced estimates for all three of those companies. For FSLR, he now sees $3.62 next year, and $5.92 in 2010, down from $3,75 and $7.13. For SPWRA, he sees $1.22 and $2.47, down from $1.27 and $2.63. For ESLR, he goes to $1.64 and $2.92, down from $1.72 and $2.87.