SUN STOCKS UP ON HOPE FOR TAX CREDITS

Solar industry stock values jumped in response to the passage by the U.S. Senate of the tax extenders package September 23. Because the legislation had already been passed by the House, New Energy industry hopes skyrocketed as investors bought solar in anticipation of quick final ratification.

Not. The House of Representatives didn't just fail to ratify the Senate’s tax extenders package. It actually dismantled it. Separated it into 5 pieces. The surge in solar industry hopes, a one-day glimpse at the market forces to be unleashed when government policy finally does support New Energy, seems to have been premature jubilation.

American poetess Emily Dickinson famously referred to hope as “…the thing with feathers…” For the New Energy industries, hope suddenly seems to be the thing without votes.

Senate Majority Leader Harry Reid (D-Nev) warned the House not to undo the package he and Democratic leaders had carefully crafted to win approval from the Senate.

Senate Majority Leader Reid: "Don't send us back something else..It will not pass. If they try to mess with our package, it will die.''

Is it possible the House will have the audacity to wreck havoc in perhaps the only sector of the market not crashing?

Rhone Resch, President, Solar Energy Industries Association (SEIA): "We're probably 50-50 at this point…"

Vital New Energy tax credits will expire December 31 if the legislation does not pass. Expiration will likely drive the New Energy industries into recession for 2009.

Some speculate Congressional hesitation is due to a fear there will be no revenues to fund the credits in the wake of the financial crisis bail out. But failure to extend them will make the crisis worse and a resuscitated New Energy sector will drive recovery.

For the solar energy industry, the key to the measure is the investment tax credit (ITC) that allows system purchasers to deduct 30% of residential system cost and removes a $2,000 cap. That would drop the average cost of a 4-kilowatt home system from $28,000 to $21,000.

Resch, on what passage means: "You're going to see national markets open up for residential solar…"

Research forecast: The 8-year tax credit extension means 440,000 new solar industry jobs and a doubling of new solar capacity to ~630 megawatts in 2009.

Resch: "Congress has a moral obligation to not only bail out Wall Street, but ensure business interests continue to operate in the country…"

The measure the House is screwing with also represents similar growth in the wind industry, the biomass industry, the marine energies industry, the energy efficiency industries and the plug-in hybrid electric car market.

According to the White House, President Bush will sign the tax extenders package if and when it gets through Congress.

Contact Congress and demand they pass the tax extenders package at: the American Wind Energy Association’s POWER OF WIND or the Solar Energy Industries Association’s TAKE ACTION.

click to enlarge

Evergreen Solar, Energy Conversion Surge on Tax Bill
Christopher Martin, September 24, 2008 (Bloomberg News)
and
Sunny Day for Solar
Andy Stone, September 24, 2008 (Forbes)

WHO
Energy Conversion Devices Inc.; Evergreen Solar Inc.; Akeena Solar Inc.; First Solar Inc.; Suntech Power Holdings Co.; Trina Solar Ltd.; SolarCity (Lyndon Rive, CEO)

WHAT
The extension of the investment tax credit (ITC) incentivizing the installation of solar energy systems was part of the tax extenders package passed by the U.S. Senate.

View the full ENER chart at Wikinvest

WHEN
- Thru 2016: The ITC approved in the Senate runs 8 years.
- December 31: The House must approve the measure before the existing ITC expires on the last day of the year.
- Congress was expected to adjourn for the election September 26 but the financial crisis leaves that in doubt.

WHERE
- ECD is based in Rochester Hills, Mich.
- Evergreen is based in Marlboro, Mass.
- Akeena is based in Los Gatos, Calif.
- First Solar Inc. is based in Phoenix, Ariz.
- Suntech Power Holdings Co. is based in China.
- Trina Solar Ltd. is based in China.
- SolarCity is based in Foster City, Calif.

WHY
- The ITC allows homeowners, businesses and utilities to deduct 30% of the cost of new solar systems from their income tax.
Provisions of the Senate legislation::
(1) a 1-year extension of the wind energy industry’s production tax credit (PTC),
(2) a 2-year extension of a production tax credit for biomass, geothermal, hydrokinetic and some forms of solar,
(3) an 8-year extension of the solar energy investment tax credit (ITC),
(4) $2.5+ billion in tax credits for pilot carbon capture and sequestration (CCS) projects, (5) authorizes the National Academy of Science to assess IRS incentives’ impacts on greenhouse gas (GhG) emission abatement,
(6) allows tax credits for cellulosic ethanol and biodiesel production and a tax credit for the purchase of a plug-in hybrid electric vehicle,
(7) includes tax credits for the continuing redevelopment of the World Trade Center area, (8) approvesw $3 billion in bonds and tax credits for efficiency and GhG abatement projects and construction,
(9) includes a package of extensions on tax breaks for teachers, veterans, hurricane victims and IRS sting operations.
- The legislation is estimated to cost taxpayers $2 billion over 10 years.
- Energy Conversion Devices: Up $7.64, 14%
- Evergreen Solar: Up 58 cents, 10%
- Akeena Solar: Up 93 cents, 22%
- First Solar (world's largest maker of thin-film solar modules): Up $10.51, 5%
- Suntech Power Holdings: Up $2.01, 5%
- Trina Solar: Up $2.27, 8.3%

View the full AKNS chart at Wikinvest

QUOTES
- Bloomberg News: “Shares of most U.S. and Chinese solar manufacturers also rose.”
- Forbes: “With the 30% credit, solar cells can produce electricity for as little as 20 cents per kilowatt hour on residential rooftops, putting the cost of solar juice on par with grid electricity in states like California…”
- Lyndon Rive, CEO, SolarCity: "Without [the ITC], we're not going to have scale that brings solar to grid parity, and investors aren't going to be interested…"