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Solars getting slammed

October 6th, 2008 · No Comments

A year long we had to witness the farce of the US tax incentives extensions (which are set to expire at the end of the year) not making it numerous times, with dire consequences for solar plays which are dependent on the US market. Finally the bill was passed by both Senate and House, and what happened, the sell-off exelerated.

We already noticed solar companies like Trina Solar (TSL) were approaching their IPO price of two years ago, despite two years of triple digit growth. Or Suntech (STP), which is really expanding big time in the US to take advantage of the expansion possibilities the extensions give.

TSL is now way below it’s IPO price, we cannot imagine that will last for too long though. People should take advantage. It’s down 25% today, this is getting ridiculous.

With solar stocks down bigtime after the announcement Friday, and again even much more today, you might need some reassurement that the extensions are indeed a positive force:

  • Passage of the Emergency Economic Stabilization Act of 2008 (H.R. 1424) included extension of the New Energy industry federal tax credits, specifically (1) extending the solar energy industry’s investment tax credit (ITC) for 8 years, (2) granting the same tax benefit to small wind installations, and (3) extending the wind energy industry’as production tax credit (PTC) for another year.
  • The folks at the Solar Electric Power Association (SEPA) focused on a very particular aspect of the new legislation that allows electric utilities to take advantage of the credit. It opens the door for big capital to come into the large-scale solar installation market.
  • Julia Hamm, executive director, SEPA: “U.S. electric utilities’ engagement with grid-connected solar electricity has increased significantly in 2008, with major photovoltaic and concentrating solar thermal project announcements totaling more than 5,000 megawatts…[Without the ITC], the only viable financial option was to have these plants be owned and operated by independent power producers…The change to the tax credit facilitates utility ownership as another option, which will result in additional projects and innovations.”
  • Example: Pacific Gas and Electric Company (PG&E) announced the 2 biggest photovoltaic (PV) projects ever planned (one 550-megawatts, the other 250 megawatts) this past summer — pending extension of the ITC.
  • As this example shows, the expectation of what will happen as a result of the tax credit extensions is hardly hypothetical. Large-scale solar installation activity was already poised to explode into action because of the many state Renewable Electricity Standards (RESs) driving New Energy development by requiring the utilities to produce specific portions of their power from New Energy sources by a date certain. The tax benefit is sure to be a shot of financial adrenalin.
  • Example: Duke Energy has been making plans for new solar capacity ever since it became clear North Carolina would pass an RES. Now Duke can take ownership of everything it has been developing.
  • Jim Rogers, chairman/president/CEO, SEPA member Duke Energy: “This is a very positive development for the utility industry as it will go a long way to putting solar power within reach of many more Americans…It is exactly what we need as we explore investing $100 million to install, operate, maintain and dispatch solar panels on our customers’ rooftops in North Carolina as a viable option to build a bridge to a low-carbon future.”
  • Example: Bolstered by Massachusett’s Green Communities Act allowing utilities to buy and develop as much as 50 megawatts of solar capacity by 2010, New England utility National Grid had already announced it would become the first company in the Commonwealth to begin building. Even without the federal tax credits and even at an estimated cost of $38 million, National Grid expected the project to be a financial winner (at a cost of only 8 cents/month/customer), thanks to the value of new generating power and the state subsidies to be earned.
  • With the extension of the tax credits, projects like these will inevitably expand rapidly.
  • Political policy-makers are finally realizing what the potential of New Energy is. The PG&E, Duke and National Grid undertakings are only the beginning in a huge new fight that will be led by the U.S. New Energy and energy efficiency industries on behalf of national security and energy independence, and against global climate change.
  • The fight will generate millions of good, productive domestic jobs and billions dollars in concrete, New Energy-infrastructure-backed new revenues. Those who can buy in now will reap huge dividends later.
  • Passsage of the legislation extending the New Energy tax credits comes not a moment too soon. The U.S. economic engine is slowing but New Energy can get it going like a solar-powered electric racing car.

But wattayouknow, “the market is always right,” no?

Tags: STP · TSL