Solar Industry Fears Subsidy Sunset

When the installation of a 29,000-square-foot rooftop solar electric system was completed at the Lee Co.’s Westbrook manufacturing facility in June, company officials described it as one of a kind — the largest in Connecticut. Now, the state’s solar companies fear it may be the last of its kind for quite a while.

With the generous federal investment tax credits for photovoltaic systems set to expire at the end of the year, the state’s solar companies are bracing for a potential massive blow to the industry.

A 30 percent tax credit on commercial projects expires Dec. 31, as does the $2,000 tax credit for residential projects. The industry is racing to complete projects by that date.

“Commercial business is slowing down because at this point you would need to coordinate the project and have it installed by the year’s end,” said Ron French, president of Vermont-based Solar Works Inc., which has offices in Hartford and throughout New England.

As companies scramble to complete projects to meet the deadline, it’s created a huge problem for installers trying to secure equipment, said Bill Stillinger, general manager of the New Britain-based PV Squared.

“To begin a job now would be a stupid business decision,” Stillinger said.

Several solar companies are trying to pick up the slack through residential installations, which have been increasing steadily. According to the Connecticut Clean Energy Fund, an arm of Connecticut Innovations that provides rebates for solar installations, the state’s 100th home installation came in February 2007, the 200th in November 2007, the 300th in January 2008 and the 400th in June 2008.

While those small-scale projects can be completed relatively quickly, they can’t make up for the loss of commercial projects indefinitely, said Stillinger, who estimates that his company’s business is evenly split between commercial and residential.

“I need that 50 percent (commercial),” he said.

Second Project On Hold

Without the federal incentives, the Lee Co. would not have been able to afford its PV system, which is about half the size of a football field, according to facilities manager Leighton Lee IV. The $2 million cost of the system was largely covered by a $600,000 federal tax credit and a $1.2 million grant from the Connecticut Clean Energy Fund.

The Lee Co. has put a hold on plans to build a second solar-powered facility at its Westbrook campus. Though adopting renewable energy would pay off for the company in the long run, installation would not be affordable without the tax credit, Lee said.

“We’ve designed the building to be solar, but without the credit, a design is all it’s ever going to be,” he said.

The uncertainty in the solar industry has been reflected in stock prices, as formerly high-performing solar stocks have sagged in recent months.

Industry troubles may become exacerbated if Spain, a global solar energy leader, also rolls back its solar subsidy program, as expected.

In the United States, investment tax credits for solar energy are part of an $18 billion renewable energy bill being debated in Congress. Solar tax credits have been voted down eight times over the past two years.

Even as many politicians tout the importance of renewable energies, the tax credits have not won renewal because funding would come from higher taxes on the oil and gas industries, said Richard Pomp, a University of Connecticut School of Law professor and national taxation policy expert.

“You have the oil and gas industry against you, and that’s partly why the Republicans voted against this in the House,” Pomp said.

Most in the industry believe the investment tax credits will eventually be reinstated in some form, even if not by the end of this year.

The presidential election figures to play some part in whether the tax credits are renewed.

Industry Prefers Obama

“There’s no question that the presidential election is important, but either way, it’s a vast improvement on what we have with the current administration,” said Jessie Stratton, deputy director for Environment Northeast, who noted that the political makeup of Congress will drive the future of energy tax credits. Still, Barack Obama appears to be the industry’s preferred candidate.

“I do think that he would be better,” Stratton said. “A lot of that has to do with the whole notion of just drilling for oil. When you look at their viewpoints, it’s clear that Obama would provide more opportunity for improvement.”

The Connecticut Clean Energy Fund is paying close attention to how the situation plays out in Congress, said spokeswoman Emily Smith.

“What they do or don’t do may ultimately impact our incentive structure,” Smith said, adding that the board has held conversations about it but have not developed specific proposals.

Some other states have already stepped up solar energy incentives. In April, New Jersey’s Board of Public Utilities teamed up with Public Service, Electric & Gas, the state’s largest and oldest publicly owned utility company, to provide $105 million toward financing photovoltaic systems over the next two years. The state’s Solar Loan Program will provide financing for 40 percent of the total cost of commercial projects and 20 percent of residential jobs.

Smith said the Connecticut Clean Energy Fund will monitor plans in other states as it develops its own proposals.

Sean O’Leary contributed to this report.