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Sensing a shift in the political winds surrounding energy, the U.S. solar industry is weighing long-term policy options as it ponders a possible future without the federal tax incentives on which it has long relied.
Unlike the wind industry, which is battling to extend a key production tax credit that expires later this year, the solar industry has several years to plan for a post-subsidy era. Its primary federal incentive — a 30 percent investment tax credit — doesn’t expire until the end of 2016.
But after struggling this year in its fight to win extension of a separate federal grant program it credits for fueling a solar mini-boom, the industry isn’t taking its chances.
“What we need is policy certainty, so we’re developing a position as to what would be the long-term approach towards reducing our industry from receiving subsidies,” Rhone Resch, president and chief executive officer of the Solar Energy Industries Association, said in an interview this week.
That could include some sort of a “ramp-down” of the tax credit — an idea that has been proposed to wean the wind industry off the 2.2 cents per kilowatt hour production incentive it has enjoyed on an on-again, off-again basis since 1992.
Despite the fallout from the collapse of Solyndra, the California solar panel maker that went belly-up after receiving a $535 million federally backed loan, Resch insists the industry enjoys broad public support.
Polling data commissioned by his group and released this week found 92 percent of voters support the development and expansion of solar power, while 78 percent expressed support for federal support for the industry.
“We’ve seen in this election cycle clean energy in general get beat up, or become a little bit of a political issue, but the reality is that solar is an industry, not an issue,” he said. “We employ over 100,000 people and we enjoy huge support from the public.”
So far, public sentiment has not helped the industry in a major policy priority: winning an extension of a grant program that allowed developers to claim an up-front cash grant in lieu of the investment tax credit.
The so-called 1603 program, named after the section of the 2009 economic stimulus law (111-5) that created it, was intended to help solar and other renewable projects obtain financing after tax equity markets dried up with the recession.
The renewables industry won a one-year extension after the program expired in 2010, but the second lease on life since it ended last year has proven elusive.
Senate Finance Committee supporters unsuccessfully tried to add another extension to a tax extenders package that cleared the panel in August, and Resch said his organization is not currently pushing to see it included when the measure comes to the floor during an expected lame-duck session.
“We’re moving on,” he said, citing the political challenge of extending a program linked to the stimulus (PL 111-5), as well as changing market dynamics.
Instead, the industry is exploring financing mechanisms employed by other industries as it looks to create a stable investment environment.
One option under review is a master limited partnership, which is a business structure that is taxed as a partnership, but whose ownership interests are traded like corporate stock on a market. Resch said such partnerships would encourage private investment in solar projects. A study by Southern Methodist University earlier this year predicted that extending their use to renewables could stimulate nearly $6 billion in private investment over the next decade.
Master limited partnerships are currently limited to oil, gas and other “depletable” energy resources, but House and Senate legislation (S 3275) introduced in recent months with bipartisan support would extend the benefits to renewable sources.
With a congressional debate about a tax code overhaul appearing likely next year, Resch said the solar industry would fight to ensure its investment tax credit remains intact through its scheduled expiration of 2016.
Should Republicans sweep the November elections, Democratic aides have said they fear the solar credit and a host of other clean energy tax incentives could be in danger of also being swept away by anti-subsidy fervor.
But Resch said he expects Congress would honor the short-term incentives for certain industries currently enshrined in the tax code — which he noted has sparked billions of dollars of investments in solar.
“In this case we’re talking about a provision that receives public support in excess of 90 percent,” he said. “So it’s a very, very popular industry to the American public.”