Solar Industry Lobbies For Manufacturing Tax Credit, Cash Grant

us%20capitol%208 Solar Industry Lobbies For Manufacturing Tax Credit, Cash Grant

SeveralU.S. Senators have introduced a bill to provide a tax incentive tosolar energy equipment manufacturers in a bid to create new jobs.

The Solar Manufacturing Jobs Creation Act, introduced by Sens.Debbie Stabenow, D-Mich. and Robert Menendez, D-N.J., would givemanufacturers access to a cash grant program created by the stimuluspackage this year to help finance solar power installations.

Makers of components such as silicon wafers, solar cells andevacuated tubes for solar water heaters already are eligible to receivea 30 percent manufacturing tax credit for building new factories orexpanding existing ones.  

This manufacturing tax credit also originated from the AmericanRecovery and Reinvestment Act (ARRA). The U.S. Department of Energy andthe Internal Revenue Service are reviewing the first batch of applications, and plan to make decisions by Jan. 15. Recipients will have four years to complete their factory plans.

The act capped the program at $2.3 billion, and makes the tax creditavailable not only to solar equipment makers, but also manufacturers ofequipment for wind, geothermal and other renewable electricity, as wellas energy storage, biofuels and electric car components (see program description).

Solar companies are worried that they will only get a small slice ofthis manufacturing tax credit program. So the Solar Energy IndustriesAssociation is now lobbying lawmakers to allow manufacturers to takeadvantage of an investment tax credit program.

The investment tax credit is meant to offset 30 percent of the costof building a solar and other renewable energy generation project. Lastfall, Congress extended the investment tax credit by eight years, so it’s set to end in 2016.

The ARRA, passed in February this year, allows developers to get acash grant instead of the investment tax credit. The cash grant goes toenergy projects that are brought online in 2009 and 2010, or if theproject construction begin before Jan. 1, 2011.

The Solar Manufacturing Jobs Creation Act would allow factory ownersto apply for the investment tax credit until the program sunsets in2016. It also would allow the manufacturers to take advantage of theshort-term cash grant program.

The cash grant program so far has benefited largely wind farmdevelopers. The government has doled out a little over $1 billion fromthe program so far, and the majority of that money has gone to largewind companies such as Spain-based Iberdrola (see Feds Issue $550.4M Green Energy Cash GrantsTreasury Grant’s Big Winners: Wind Companies). and

Making the cash grant program available to manufacturers couldbenefit quite a few solar companies that have announced plans to buildor expand factories in the United States. They include Suntech Power,SunPower, Clairvoyant Energy, Suniva and SolarWorld  (see Oerlikon Solar Tools Coming to America and SolarWorld Plans U.S. Factory Expansion Amid Tough Competition).

Building factories in the United States would reduce the costs ofshipping solar cells and panels from factories overseas. But a bigreason for setting up manufacturing here is to take advantage of any"Buy American" policies that might be adopted by local or federalgovernments.

The ARRA already has such a provision that applies to publicprojects, such as installing solar panels on government buildings (see Is Buying European A Good Idea?).

The United States was once the top producer of solar cells. Butmanufacturing has shifted to Asia because production costs are lowerthere and governments provide lucrative incentives. Large U.S.manufacturers such as First Solar and SunPower are primarily makingproducts in Malaysia, the Philippines and Germany. 

Japan, China and Taiwan had about 45 percent of the world’s solarpanel production capacity in 2008, according to GTM Research. TheUnited States had 7 percent. Whether the United States can offersimilar or better incentives to keep manufacturing cost effective overlong run remains to be seen. 

Some companies are shifting manufacturing out of the United Statesbecause production costs have become too high. Evergreen Solar, forone, plans to move solar panel assembly to China. General Electric is closing its only solar panel factory in the United States. 

Photo: Courtesy of the Office of the Architect of the Capitol