Las Vegas Sun

February 23, 2019

Currently: 49° — Complete forecast

Solar developers look for more federal money

Advocates cheered last fall when Congress passed a bill extending renewable energy incentives beyond 2008.

But the bill was passed amid the crashing credit markets, and the resulting tightening of credit has meant that banks that used to invest in renewable energy installations are no longer interested.

The result has been a string of postponed renewable energy projects and faltering renewable energy startups.

Now, the head of one of the leading solar companies in the U.S. is lobbying Congress for reforms to the investment tax credit for renewable energy installations he says would stimulate investment and spur growth in the industry.

Lyndon Rive, chief executive of solar installation giant SolarCity, is circulating an open letter to Congress and went to Washington this week to meet one-on-one with legislators in an attempt to persuade lawmakers to pass legislation giving renewable energy companies more flexibility in how they use federal tax incentives.

Among the top requests is new regulations allowing renewable energy developers to monetize their 30 percent tax credit — a change supported by powerful renewable energy cheerleader Senate Majority Leader Harry Reid.

“Sen. Reid is aware of the current difficulties the renewable energy industry has in attracting the investment capital they need to meet President (Barack) Obama’s goals for increasing renewable energy generation,” Reid spokesman Jon Summers said in a e-mail. “He supports ideas that improve the industry’s ability to attract capital during this current economic environment. ‘Monetization’ of the (investment tax credit) is one such idea.”

Renewable energy developers have been clamoring for such a change almost since the credit was extended in October as part of the Emergency Economic Stabilization Act of 2008.

Since then, renewable energy plants have become even less attractive to cash-strapped banks, Rive said.

Under the current financing system for most large renewable energy projects, banks that purchase or invest in renewable energy plants get a tax credit worth 30 percent of the plant and can write off some of the depreciation.

At it’s most basic level, it is a write-off from profits, Rive said.

Now that most large banks aren’t showing a profit renewable energy projects are less attractive.

“All the industry needed in 2008 was an extension of the tax credit, and we’re very happy we got it,” Rive said. “But unfortunately, all the companies that used to buy the solar systems and use the tax credits aren’t showing profits ... They won’t invest in your solar system because they can’t use that 30 percent tax credit. There’s no appetite to use the tax credit.”

Rive and other renewable energy developers are lobbying on behalf of changes in the law that would allow them to monetize that 30 percent tax credit.

“The House version of stimulus bill almost gets it right,” Rive said. It has a couple of things that could really start addressing this problem, but it only solves part of the problem.”

The House has supported legislation that would allow renewable energy developers to exchange their tax incentive for grant money of an equal value. This would give renewable energy developers with power purchase agreements cash upfront to begin work on their projects.

It also has a provision allowing renewable energy plant owners to carry back depreciation on the plants for up to five years. But it limits participants to those that have not taken Troubled Assets Relief Program funds.

Rive said that since most of the big lenders likely to invest in large renewable energy projects have already taken the federal money, the field of potential investors has been further constricted.

“We need a stimulus program that brings the banks back into the system,” Rive said. “The only change to the House bill would be to make the carryback apply to TARP companies — that would address the depreciation problem.”

He said he would also be enthusiastic about a federal lending program for infrastructure programs such as renewable energy plants. He said the only worry about a program like that would be about limits on the number or size of loans a renewable developer could get. After all, if there’s no bank to purchase a renewable energy plant after it’s built and the developer can’t get another loan until it sells the last plant the number of plants getting built would be small.

Renewable energy developers have already been seriously affected by the credit crunch with projects across the country stalled or canceled as developers compete for a smaller pool of investors.

Without some kind of change, the budding renewable energy industry in the United States will quickly come to a screeching halt, he said.

Rive said he is confident that once he explains the situation renewable energy developers are in, Congress will be supportive.

“We’re not asking for a handout — we’re asking to monetize what’s already been approved,” Rive said. “I don’t think anyone has an objection to what we’re asking for, but we want to make sure what we’re asking for is understood.”

Join the Discussion:

Check this out for a full explanation of our conversion to the LiveFyre commenting system and instructions on how to sign up for an account.

Full comments policy