On Wednesday, the U.S. House of Representatives passed bill H.R. 5351 to renew a standing investment tax credit for solar, as well as wind, biofuels and other renewable sources. But as in the past, the bill faces stiff resistance in the Senate and a veto from President Bush.
Most media sources have reported on the bill as if its future is still uncertain, but the general feeling among analysts, entrepreneurs and VCs that I’ve talked to is fairly gloomy. Most expect that the credits will run out, leaving the industry in the lurch until the changing of the guard in 2009.
This same bill has been knocked down two times before without even making it to President Bush, so the persistence of House Democrats in continuing to push looks more like political in-fighting than any effort at progress.
The problem for the cleantech industry is the lack of certainty. The current set of credits runs out at the end of this year, but will probably be restored — and possibly reinforced — in 2009, especially if the Democrats win the presidential election. However, that leaves an interim period of an unknown length in which ongoing projects would be unprotected. And without absolute certainty that there will be a credit at some point, many investors could be dissuaded from projects they would otherwise have poured millions into.
Curiously, many solar cell manufacturers located in the United States stand to lose less than the country as a whole does. The CEO of Nanosolar, Martin Rosencheisen, told me that there’s strong enough worldwide demand for his products that losing the ITC would have only a marginal impact on his business. But while international buyers snap up cells, the nascent industry at home will continue to languish. It is, Rosencheisen says, “really embarrassing”, in light of the steps other countries have taken to encourage investment.
For Bush, and the Senate, to turn around and accept a bill this year, House leaders would in turn need to accept a change in the funding source. At the moment, the bill is designed to rescind tax breaks to oil producers in the US in order to provide the funds for cleantech. “As soon as the bill is disconnected from the oil industry, it will pass,” opines Alain Harrus, a principal at Crosslink Capital. However, taking the money from Big Oil is a symbolic move the Dems aren’t likely to let go of.
In essence, they’re angling for political capital. After all, if the ITC dies in the Senate or beneath the veto pen, the Dems will be able to point at the corporatized greed of the Republican party — saying that they’re immorally supporting an industry that is already making record profits. The upshot: Don’t count on seeing the ITC renewed this year.