CQ WEEKLY – IN FOCUS
Oct. 29, 2011 – 11:39 a.m.
Solar Forecast: Plenty of Sun, Dark Clouds Ahead
By Geof Koss, CQ Staff
For the past few months, solar industry lobbyists have been working overtime to spread a message on Capitol Hill: Despite the high-profile bankruptcy of California’s Solyndra panelmaker, the industry is creating jobs, even as the rest of the economy sputters.
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According to the Solar Energy Industries Association, the industry employs more than 100,000 workers nationwide — more than double 2009 levels. Solar installations grew 69 percent in the second quarter of 2011 over the same period last year, and fourth-quarter results may be the best ever, SEIA President Rhone Resch said last week.
Underlying the industry’s rapid growth are two factors. First is the success of the grant program created by the 2009 economic stimulus law, which is credited with keeping financing for solar and other renewable-energy projects flowing even as lending markets dried up during the recession. The second factor is a dramatic fall in solar prices, the result of global overproduction.
“The cost of solar to the consumer has come down dramatically, and it’s allowed us, by using the [grant] program, to scale up our industry so that we’re one of the fastest-growing industries in the United States today,” Resch says.
But what happens next for the solar industry remains a big question mark. Republicans’ fierce attack on Solyndra is raising questions about the future of the grant program, which expires in December. (The loan guarantee program that funded Solyndra expired Sept. 30.) And the record low prices for solar panels that have made power from the sun suddenly affordable to many businesses and homeowners played a significant role in driving manufacturers such as Solyndra into bankruptcy.
A trade complaint filed earlier this month by a coalition of U.S. solar manufacturers, charging that a rapid influx of government-subsidized solar imports from China violates international trade rules, could lead to an imposition of duties on Chinese imports. That prospect unnerves both U.S. developers, who have seen installations boom as solar prices drop, and manufacturers, who exported $5.6 billion in solar materials to China and other nations in 2010.
Nonetheless, the complaint has won support from some key congressional lawmakers, who see it as a basic issue of fairness. “China is cheating,” proclaimed
Stimulus Stigma
The immediate hurdle for the solar industry is winning an extension of the grant program, known on Capitol Hill as 1603 in reference to the section of the stimulus law that created it. The program allows companies to claim an up-front grant in lieu of tax credits they would not be able to claim until much later. The program was a lifeline for renewable-energy projects that struggled to find financing after the equity markets dried up in the recession.
With the 1603 program originally scheduled to expire at the end of 2010 along with other stimulus initiatives, renewable-energy advocates secured a one-year extension at the end of the 111th Congress. With another expiration looming in December, supporters are beating the drums for another reprieve, arguing that obtaining financing remains as difficult as ever.
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“If we want to keep jobs growing in this country, extending a program like this is about as direct and as easy as it gets,” says Resch, who credits the loan guarantees for funding 19,000 energy projects and attracting more than $4 billion in private capital.
Solar Forecast: Plenty of Sun, Dark Clouds Ahead
Despite the program’s track record, winning another extension will be an uphill fight in the 112th Congress, where conservative Republicans and deficit-focused tea party members have tagged as failures both the stimulus and the Obama administration’s clean-energy agenda. Tax credits are getting to be a tough sell in the current deficit reduction climate.
To counter the criticisms, the industry group has prepared extensive data highlighting solar jobs in congressional districts across the country, as well as the prospects for additional job creation by extending the 1603 program. One recent study forecasts the creation of 37,000 jobs in 2012 from a one-year extension of the program — a 35 percent increase, Resch notes.
But the solar industry has struggled to make its job-creation message heard above the din surrounding the September bankruptcy filing of Solyndra, which got more than a half-billion dollars in loan guarantees.
The company’s collapse seems almost tailored for critics of the White House, who have used ongoing investigations to criticize the tens of billions of stimulus dollars devoted to clean energy. GOP frustration over the issue came to a boil in September, when the House passed a stopgap spending measure that included a $100 million cut from what was left of the original $2.5 billion designated for the stimulus program that funded Solyndra. The cut was later rejected in negotiations with the Senate.
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Nonetheless, Solyndra’s collapse highlights the obstacles facing renewable companies in trying to win an extension of the program. “Solyndra is one company whose business model didn’t work,” says Resch, adding that his group has spent the past two months “helping to educate people on the Hill and in the media about the state of the solar industry and how radically different it is from what happened to Solyndra.”
“You had Solyndra fail,” he says. “But the rest of the industry is thriving.”
Trading Complaints
Others see the U.S. solar industry in less rosy terms. Wyden, for instance, said Chinese government subsidies are squeezing U.S. solar manufacturers out of the growing global solar market, which he estimated has nearly quadrupled in the past five years.
“Instead of growing to meet the new demand, the American solar industry is rapidly collapsing,” Wyden said, citing the closing or downsizing of seven U.S. plants in the past 18 months.
The trade complaint, filed with the Commerce Department and International Trade Commission by SolarWorld and six unnamed manufacturers of crystalline silicon solar cells and panels, seeks the imposition of duties of greater than 100 percent of the wholesale price of imported Chinese panels.
The petition has exposed a rift within the industry between developers, who have benefited from cheap solar components, and some U.S. manufacturers, who are struggling to compete in what Resch termed “an extremely competitive environment.” Other U.S. companies have prospered by exporting solar components, including to China, says Resch, whose organization is neutral on the complaint.
Kate Gordon, vice president for energy policy at the Center for American Progress, says concerns about a full-blown U.S.-China solar trade war may be overblown, given the “symbiotic” relationship between companies in both countries.
Solar Forecast: Plenty of Sun, Dark Clouds Ahead
“China is very dependent on the market of U.S. consumers, just as the U.S. is dependent on the market for China manufacturing,” she says.
Resch says that both U.S. manufacturing and imports will continue to grow regardless of what happens with the complaint. “I am not concerned about the outcome of this case on the overall health of the solar industry,” he says.
However, he predicts “a pretty significant drop-off in the growth” should the grant program expire. SEIA is hoping to see an extension folded into an end-of-the-year package to extend multiple tax provisions.
Gordon says 1603 proponents can benefit from widespread industry support for an extension. “There’s a lot of business pushing for it.”
But complicating matters is the fact that a one-year extension would probably be scored by budget officials as costing at least $1 billion. “This is a very hard time to get an extension of any program that gives money to anybody,” she says.
FOR FURTHER READING: Solyndra deal scrutinized, CQ Weekly, p. 1919; Obama plan to reduce oil imports, p. 790; clean-energy standard proposed, p. 198; reassessing energy policy, 2010 CQ Weekly, p. 2157; energy provisions in 2009 stimulus (PL 111-5), 2009 CQ Almanac, p. 7-8.