How Much Impact Can the Feds Have on Solar?

The investment communityisn’t as bullish on federal grant and loan guarantee programs ascompany execs. At least one analyst expects the shipment of solarenergy equipment worldwide to fall 25 percent.

It’seasy to opine about how the various government spending plans onrenewable energy – whether they are in the United States or China –will be a great boost for the struggling solar industry.

But it’s harder to assess and determine how big the impact of thepolicy and funds would be. At Intersolar North America in San Franciscothis week, bankers and financial analysts are offering a less exuberantview of the impact of government aid.

Not only would the solar market need public money, but it would alsoneed a heady fusion of private money worldwide before it perks upagain, said Vishal Shah, a senior analyst with Barclays Capital, at apanel Wednesday.

"We are seeing improvements in bank financing and the credit market.We are not seeing the positive impact yet, but I would imagine thatduring the second half of 2010 we will see that money flowing into thesector," Shah said.

Shah’s sentiment echoed what Mark Zanoli, managing director ofinvestment banking at JP Morgan, said at the conference earlier thisweek.

"The tax equity market has collapsed. Unless we revive that marketconcurrently, then we are heading to a cliff," Zanoli said. "The cashgrant is only a two-year program – what happens when the government nolonger writes checks?"

Zanoli was referring to a newly created program that wouldessentially provide a 30 percent rebate to developers for the cost ofinstalling solar power projects in the United States.

The U.S. Department of Treasury issued guidelines last week toexplain its rules, but it’s not going to start accepting applicationsfor a few more weeks (see Feds Almost Ready to Issue Renewable Energy Grants).

Shah said money could start trickling in from the grant program thisyear, but it isn’t likely to flow in full force until the second halfof 2010. Developers won’t receive the money until after the projectsare up and running.

The same is true for another DOE program that many solar companieshave pointed to as a lifesaver – a loan guarantee program to helpcompanies manufacture solar energy equipment and build solar farms.

The DOE hasn’t released the guidelines for the loan guaranteeprogram yet. Getting those loan guarantees won’t be easy, said NathanCampbell, senior vice president of Macquarie Capital Advisors, at theconference earlier this week.

"I’d be nervous saying the DOE loan guarantee will be a great growthto the industry," Campbell said. "It will take a lot of time and stepsthat you don’t expect."

For the global solar market, Shah said 2009 will be a tough year.

The market has been battered by an oversupply of raw material andcomponents for making solar energy equipment, a result of a large-scalebuildout of factories that began prior to the financial market crashlast fall and the soft market demand that has occurred since.

Shah projecting a 25 percent decline in shipment this year from 5.8 gigawatts in 2008.

"The industry was somewhat optimistic at the beginning of the year,talking about a flat growth for this year," Shah said. "The oversupplyproblem still remains."

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