While Congress Bickers, Solar Industry Holds Its Breath

Energy is the most regulated sector of the American economy, making public-private partnerships essential to scaling the solar industry. Such partnerships have helped other energy sectors to reach scale over the past hundred years. Solar energy finally received stable policy support in 2005 with the Solar Investment Tax Credit, and the industry has seen some other legislative victories in the subsequent years. This has allowed the U.S. solar energy industry to grow at dramatic rates in recent years. But the industry’s continued growth is at risk due to partisan bickering and classic congressional gridlock. For solar energy to move forward, continue to reduce costs, and provide clean, reliable energy to utilities and other power customers, we need action from our public partner.

Three Crucial Public Policies Affecting the Solar Energy Industry

Despite the support of 94% of Americans—according to a recent poll—who believe the U.S. should develop and use more solar energy, the American solar industry will face significant hurdles if Congress fails to act on three critical policies: extending the U.S. Department of the Treasury Grant Program (TGP); enacting robust domestic manufacturing incentives through the American Recovery and Reinvestment Act to attract solar manufacturers to America’s shores; and refunding resources taken from Department of Energy’s (DOE) Loan Guarantee Program.

Treasury Grant Program. The TGP has been a major contributor to what is turning out to be solar’s most robust year of growth ever. The solar industry is set to grow 151% in 2010, and much of this growth has been driven by access to the TGP. The program was created in the Recovery Act to address the lack of tax equity financing available to project developers. And it has worked like a charm. To date, the TGP has allowed construction of more than 1,000 solar projects in 41 states. Most of these projects were developed by small businesses—local developers that created jobs and economic opportunity in their communities. This is stimulus at its best.

The slower-than-expected-recovery of the financial markets means the TGP is still a vital tool for project developers. Yet the program is set to expire at the end of 2010. If Congress allows the program to expire, it will jeopardize solar projects from coast to coast, not to mention tens of thousands of jobs.

American Recovery and Reinvestment Act. In addition to the TGP, the Recovery Act, which was enacted in 2009, established new incentives to encourage domestic renewable energy manufacturing. To put the need for investing in manufacturing in context, a decade ago, the U.S. manufactured 40% of the world’s photovoltaic modules; today, we manufacture less than 10%.

Although the Recovery Act incentives allowed construction of 58 solar manufacturing plants in 17 states, a lack of truly robust manufacturing incentives is causing the U.S. to fall behind in solar manufacturing. Congress needs to do more to attract solar manufacturers to the U.S. Doing so will create thousands of domestic manufacturing jobs and billions of dollars in economic growth.

DOE’s Loan Guarantee Program. This third program was set up to play the crucial role of underwriting clean energy projects, sending clear market signals to private investors that they are sound financial endeavors with long-term growth potential. However, despite the program’s early promise, its implementation has been marred by slow bureaucratic turnaround on applications and two congressional funding cuts that took $3.5 billion out of the program’s $6 billion reserve.

We have had some success with it, and four loans have already been announced. But in order for this policy to work in the long term, Congress needs to return the money taken, and the DOE must trim its bureaucracy so the process can be conducted in a timely manner. Solar developers are ready, but the inefficiencies at the DOE must be worked out for the program to work as advertised. Private investors won’t wait forever to see whether utility-scale projects receive a loan guarantee, or if there’s even money in the program.

Promoting Solar Energy Growth Through Effective Policies

These three policies are vital for the American solar industry to keep moving forward. So are efforts by the executive branch to advance utility-scale solar development on public lands—something supported by 75% of Americans, according to a poll earlier this year. Positive developments include the Department of the Interior’s recent approval of the first solar plants in history to be built on federal public lands, coupled with 23 GW of utility-scale solar power plants in the development pipeline.

As Washington’s costly gridlock continues, the solar industry is working hard to maintain a healthy investment environment for the industry. This is an industry that is growing rapidly, reducing costs, and setting ambitious goals to power millions of American homes. Smart, effective policies are key components in fostering the growth of this industry. The American taxpayers support it. According to a recent poll from Kelton Research, 80% of Americans support shifting policy and financial support from the fossil fuel industries to solar. It is time for Congress to get up to speed with the American public or risk falling behind in this rapidly growing global industry.

Rhone Resch ([email protected]) is president and CEO of the Solar Energy Industries Association.

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