Scott Wiater
President, Standard Solar, Maryland
Yes, it is still a viable market but we need costs to come down and
we need electricity rates to continue to go up and we need policies
outside of the ITC that don't impeded our progress. So if all of that
was the way it needs to be then we're fine but as we all know there are
probably going to be some fights and some hurdles.
Some states almost overnight become problematic. I think the biggest
[state hit] in the solar industry will be California and non-RPS states.
Georgia is a good example where without the 30 percent ITC there is no
mechanism in place to make up any shortfall. Whereas in RPS states that
have SRECs that are fair-market traded and if the compliance payment is
high enough and there is enough delta between where they are currently
trading and that penalty payment then there is at least a mechanism in
place to make up some of the shortfall if the ITC goes away.
I am currently a commercial solar developer in sales in Hawaii. I
think we will sign a lot less deals when it downshifts to 10 percent.
The reason being is business owners so often have such a short-term
view. I have had several clients turn away from the current offering,
which often shows approximately a 2-year return. So many properties are
not owned but rather leased, you can forget about signing them up after
the reduction.
It's really not about efficiency improvements. It's the cost of
running businesses, paying rent, all the many line items in a commercial
development. The cost of panels is just one line item in a few dozen
and those few dozen are not likely to change. It's similar in the food
industry, if the price of grain drops to zero, little or no change would
occur in the price of a box of cereal.
Solar will slow down. My employer told me when there was no federal
tax credit there was nothing happening on the island ...just a slow
crawl of solar integration. And they had in place the 35 percent state
tax credit. When the 30 percent federal came on board it took off like a
rocket.
By the end of 2016, the low-hanging fruit in solar development will
have been done, at least a large portion of it. If the Feds extend the
sunset date, the solar work will continue. After, solar will fall off,
as will most renewable investments, because of the extremely low natural
gas prices here in the U.S. NG is just over $2/MMBtu; it is about $8 in
the EU. That differential is a windfall for those who can figure out
how to ship Liquefied NG around globe for least cost. You will find
energy investment dollars migrating into the LNG sector and away from
solar and wind after the ITC drops. However, solar and wind will still
make good financial sense in many situations, and will be an easy sell
especially to corporate industrial facilities as a hedge against future
NG spikes, which of course, are inevitable, too.
Matt Wright
Senior VP, National Cooperative Bank, Washington, DC
I think if it is renewed at 30 percent that would be great. There is
going to be a huge push to get as much done as possible in the next year
or so with the expectation that the ITC will drop to 10 percent. That
activity and the pace at which these projects are being developed are
creating efficiencies in project development and installation. For
example, some developers in NC are projecting to have achieved grid
parity by 2016 as a result of drops in hard costs and efficiencies in
installation. So what we are going to see across the U.S. in the next
several years is a huge run up in projects and development from now
until 2016 followed by a cooling off period in early 2016 should the ITC
not be renewed at 30 percent. During this "cooling off" period many
believe there will be consolidation between some of the smaller
developers and EPC firms.
However in the long term it will really be beneficial because I think
the desire is still out there for solar energy and consolidation will
bring even more efficiencies and scale to the market. Additionally, many
states still have utilities under RPS mandates that they really need to
hit. So while there may be a slowdown, there will be a rebalancing
across the industry throughout the year while people figure out the new
world order. Generally speaking I don't see the solar industry going
away anytime soon, then again I'm a glass half-full kind of guy.
As a developer of both residential and commercial PV projects, I feel
that although we have come a long way with sustaining our industry with
innovation, cost reductions and product improvements, the commercial
development will suffer greatly without the tax credit remaining at 30
percent. Business owners view these projects very differently than
homeowners and expect very different returns. When you are in business
with budgets and forecasts and obviously running your business, you will
not spend the time, effort or money on a separate "business
opportunity" if it does not at least offer the same return as your
everyday business. When the ITC goes down it will not offer the same
opportunity therefore business owners, municipalities and financiers
will not be interested. We need to extend the ITC.
Solar globally will still do much better if there is no tax
incentive. For example, PV hit grid parity in Jordan, UAE and MENA
capacity is surging. The Mexican distributed generation market is
growing by 300 percent. Domestic rates there hit grid parity two years
ago and industrial tariffs will make grid parity by 2016 - 2017.
I agree that the industry should eventually wean itself off
subsidies. But going from 30 percent ITC to 10 percent overnight in the
U.S is a big problem for the industry in the short-term. Our government
should recognize that a phase-out of the ITC makes more sense. Say, drop
it by 5 percent per year until it is gone by 2022. Now with the GOP in
power in Congress, one might think that the ITC has no chance of being
extended, but Google this: in 5 states, the Tea Party has aligned with
the solar industry to support solar incentives because it is good for
employment and the economy. Let's not give up on Congress extending a
modified ITC just yet.
http://www.renewableenergyworld.com/articles/print/volume-18/issue-4/departments-columns/the-big-question-can-the-us-commercial-solar-industry-survive-with-a-10-percent-itc.html
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