Yea, there was big drama yesterday when the US House of Representatives shot down the rescue package, sending the markets into a tail spin. But there was also smaller drama, House and Senate cannot agree on how to finance the extension of the tax credits for alternative energy. That send the solars in an even bigger tailspin.

Solar Stocks Clobbered; No ITC Extension Before Election
Posted by Eric Savitz

• Solar stocks are getting an especially ugly drubbing on a very nasty for stocks overall, on news that Congress is unlikely to approve an extension to solar energy investment tax credits before the November election, and possibly not until a new president is sworn in early next year.
• To review: the Senate last week approved a bill which included an 8-year extension of the 30% solar tax credit; the House approved a bill which did the same thing, but included various other provisions the Senate didn’t want. But it now appears that the current House session is going to end without any progress on reconciling the two measures.
• According to CQPolitics.com, House Majority Leader Steny H. Hoyer, a Maryland Democrat, “criticized what he called the Senate’s attempt to legislate by blunt force.” The story also noted that the House has no plans to call a lame-duck session after the election, a decision which it notes will cause “extreme distress for business lobbyists who were counting on Congress to extend tax breaks for renewable energy, research and development, and financial-services companies, among others.”
• Dan Ries, an analyst with Collins Stewart, asserted in a research note this morning that “the ITC extension looks stalled until after the election and possibly until a new president is sworn in.” He says the news is “a setback for the solar industry,” and in particular singles out First Solar (FSLR), Sunpower (SPWR) and Energy Conversion Devices (ENER).
• Ries also notes that Spain on Friday finally established its new solar subsidy caps; he notes that the country set a 100MW cap per quarter, plus a one-time addition of another 100 MW. He notes, though, that the policy appears to translate to 500 MW over 5 quarters, including the period from Sept. 28 through the end of this year. That suggests a 400 MW cap for 2009, which he notes is above the 300 MW included in earlier proposals, but below the 500 MW included in recent drafts. The policy would increase the cap 15% in 2010 to 460 MW.
• Finally, one other note. Piper Jaffrey’s Jesse Pichel this morning notes that Shunda, a China-base silicon wafer and polysilicon manufacturer that is a supplier to JA Solar (JASO), Suntech (STP), Sharp and Q-Cells, suffered a silicon tetracholoride leak. He says no one was hurt from the leak, but that Shunda has shut down for repairs until October 10. Pichel notes that other China-base poly startups have had similar minor incidents as they expand production. Pichel contends that the stumbles of some China-base poly makers “will likely prevent polysilicon oversupply in 2009 and exemplify that certain new polysilicon players may have overly aggressive targets.”

That latter remark is interesting, as the current market consensus seems to be that poly prices are set to drop significantly, leading to a bit of a shake-out in the industry as poly shortage functioned as an important barrier to entry. Perhaps not..