Solar Will Slow After U.S. Tax Credit Extension and That’s Good

23 Dec 2015 | Author: | No comments yet »

Oil’s Out, Green’s In, and Israel’s Sitting Pretty.

A U.S. tax break for solar energy set for Congressional approval Friday will slow growth next year by about 24 percent — and that’s great for the industry. Who would have imagined that the U.S. would be moving, in a bipartisan way, to advance its climate policy and clean energy goals less than a week after the Paris agreement?Although the Islamic State is located in some of the sunniest regions of the globe, it’s making money selling not stolen solar panels and wind turbines but stolen oil.Uber Technologies Inc. drivers will deliver Christmas trees free of charge to residents of two German cities as the ride-share company studies a broader on-demand service across the country. Developers were expected to install about 11.9 gigawatts of solar panels in the U.S. next year as they raced to qualify for the investment tax credit that was set to expire at the end of 2016.

And yet in the budget deal struck on Wednesday, Democrats traded a lifting of the oil export ban for an extension of much-desired tax credits for wind and solar. That should send a message to Congress, whose new $1.1 trillion spending bill extends the wind-production credit that expired last year and provides a new extension to the solar credit.

The five-year extension announced late Tuesday will ease the pressure, and installations will now be about 9.1 gigawatts, according to a revised forecast from Bloomberg New Energy Finance. Thus, as the Knesset Economics Committee was winding up its kangaroo hearings on natural gas – the one in which lots of experts were called up and valuable time wasted on a foregone conclusion, that the framework agreement is no good and should be renegotiated – in Paris the nations of the world adopted a long-awaited climate accord that could well set a new era of renewable energy and green economics into motion. The extension came as a surprise to the industry and drew cheers from companies that were expecting higher costs in 2016 as they rushed to complete projects. Slowing construction means paying less for labor, equipment, marketing and financing, said Tom Werner, chief executive officer of SunPower Corp. “A turbo-charged 2016 would have an impact on jobs and make it difficult to plan hiring for the boom-bust cycle,” Werner said in a phone interview. Since Congress has abandoned a debt ceiling, or any budget restraint, legislators do not have to find the funds to pay for the $1 trillion-plus package.

Combined, the extensions will spur more than $73 billion of investment and supply enough electricity to power 8 million U.S. homes, according to BNEF. “This is massive,” said Ethan Zindler, head of U.S. policy analysis at BNEF. There’s the stupid one, namely that climate change isn‘t for real or, if it is, it isn’t caused by human activity and therefore can’t be stopped.

In the short term, the deal will speed up the shift from fossil fuels more than the global climate deal struck this month in Paris and more than Barack Obama’s Clean Power Plan that regulates coal plants, Zindler said. Then there’s a more reasonable one, which is that the accord is a voluntary agreement with no sanctions, standardized benchmarks or enough money pledged to give it teeth. Another reasonable criticism of COP21 is that short-term interests like economic growth and oil profits will prevail over long-term ones, like preventing humanity from being fried to death. This is especially relevant as the long-term benefits are what economists call a “public good,” i.e., one where everyone benefits but only a few bear the cost, for example, utilities putting scrubbers on smokestacks to control the release of acid gases: Everyone enjoys cleaner air but only the power company pays for it.

GTM Research senior vice president Shayle Kann said the extensions should have a “huge impact,” on companies like SolarCity, which have been trying to build business in new states that don’t necessarily have strong state solar incentives. Greenhouse-gas emissions from power plants have declined by 15% from 2005 to 2013, according to the Energy Information Administration, not from the use of renewables, but because of the growth of natural gas-fired power plants. In the real world, it’s clear now that China has accepted the idea that something has to be done to control emissions, and anyone reading analysts’ reports on “green” bonds and the money to be made in solar power and electric cars can easily discern that Wall Street is on board, too. The extension will reduce project financing costs and increase profit margins at solar companies including SolarCity Corp., SunEdison Inc. and First Solar Inc., said Vishal Shah, an analyst at Deutsche Bank AG.

The public-good obstacle is a big one, especially with oil prices so low and likely to stay that way for a while, making alternative energy less economically competitive. Shares in solar companies surged this week on the news. “Companies such as First Solar were rushing to complete U.S. projects ahead of the deadline,” Shah wrote in a research note Thursday. “We now expect these projects to push out to 2017 and see margins improving.” America generated 27% of its electricity from natural gas in 2014, compared with 4.4% from wind and less than 0.5% from solar. (Another 39% came from coal and 19% came from nuclear power.) Wind energy is dependent on credits. The only question is whether this rate of change is compatible with a sense of climate urgency — or with a recently embraced global goal of striving to limit the planet’s warming to just 1.5 degrees Celsius. Oil producers have lobbied for years to lift the ban, but it isn’t likely to significantly affect either consumption of oil or deployment of renewables.

That in turn will set off a frenzy of technology innovation and investment and produce a greener car and more energy-efficient air conditioner, whether consumers like it or not. It will go a long way to undermining Iran’s pretensions to regional hegemony (although hurts the Saudis, who are sort of our new friends, even more). Wind power has had an especially tumultuous relationship with U.S. lawmakers, who have kept the industry’s credits alive through a disruptive ping-pong game of short-term extensions every year or two. “You open manufacturing plants and then you close them. The climate-change accord will also shift the balance of energy power to countries with lots of sun and wind, of which Israel has a lot of the former, though not as much as you would think.

The top 11 states that represent 75% of U.S. wind capacity are Texas, California, Iowa, Illinois, Oregon, Oklahoma, Minnesota, Washington, Kansas, Colorado and North Dakota. But Israel is among the few countries in the world with the scientific knowhow to develop alternatives to fossil fuel, and there are quite literally trillions of dollars to be spent. On Nov. 30, the EPA announced it would increase the amount of ethanol required to be consumed in the gasoline pool from amounts set earlier in the year. When gasoline prices are low, as they are now, ethanol raises the price of motor fuel, even though the gasoline-ethanol blend, currently 10% ethanol, lowers vehicles’ gas mileage. Bob Goodlatte (Republican from Virginia), Peter Welch (Democrat from Alabama), Steve Womack (Republican from Arkansas) and Jim Costa (Democrat from California) introduced a bill that would eliminate the corn-based ethanol requirement.

The RFS requirements announced today will push ethanol volumes beyond the blendwall in 2016, leaving American consumers and our economy to feel the negative effects.” The new spending bill might protect Americans from tax hikes, but it doesn’t protect them from subsidizing wasteful programs.

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