The real story on solar — growth, not Solyndra

The Solar Energy Industries Association and GreenTech Media released their quartery report on solar development in the U.S. today, and the one word notably absent from all 22 pages of the executive summary was — wait for it — Solyndra.

The failed solar panel manufacturer did get a few mentions during the press conference that SEIA and GreenTech held to discuss the report this morning — I listened in on the event at the National Press Club in Washington, D.C. — but mostly to point up how one failure in the industry has overshadowed its spectacular growth.

The photovoltaic side of the industry — solar panels or PV — had a recordbreaking third quarter, with 449.2 megawatts installed, a 39 percent increase over the second quarter and a whopping 140 percent increase over third quarter 2010. California accounted for 196.7 megawatts — or close to 44 percent — of the total.

Just for scale, the NextEra-GE Desert Sunlight project now under construction near Desert Center is 550 megawatts. When completed, it will provide enough power for 160,000 homes.

The third quarter figures put U.S. installations over 1 gigawatt for 2011, the first time the U.S. has passed the 1 gig milestone in a year — and growth is projected for the fourth quarter as well. The U.S. now has 3.1 gigs of PV solar connected to grids across the country, according to the report.

“It’s a good news story,” said Rhone Resch, president of SEIA. “(The U.S.) has  made a strategic investment in solar, and we are seeing it pay off, not only in solar installed but jobs created. We’re seeing it across all 50 states.”

What’s driving the growth, besides the 40 percent plunge in panel prices this year and the growth of third-party leasing agreements, has been a key government incentive, called the 1603 program, which allows solar and other renewable energy companies to take a cash grant instead of the 30 percent federal tax credit.  Passed as part of the federal stimulus, 1603 grants are only available for projects that are completed and connected to the grid, and as Resch and other solar officials said at the press conference, the program doesn’t represent extra money — it’s only a change in how the tax credit is taken.

The problem now is that 1603 is set to expire at the end of the year, and renewable companies and trade associations across the country are lobbying Congress hard to extend it for at least another year.

The main issue is that the tax credits in and of themselves don’t help solar companies finance their projects because they are hard to monetize — that is, companies that might invest in a project and use the credit, aren’t; banks still aren’t lending.

“Tax-based policy is not effective in a bad economy,” said Joe Desmond, a senior vice president for BrightSource Energy, the developer for the Ivanpah project and Rio Mesa, a solar tower project planned near Blythe. ”We have not fully recovered from the economic crisis. There’s an important role for 1603 to play. The program allows us to monetize tax equity, so the debt is lower-cost debt; the cost of construction is lower, the cost of energy to consumers is lower.”

Tony Clifford, CEO of Standard Solar, a company in Maryland, said his firm has grown from three employees in 2007 to 100 today, thanks in large part to 1603. If the program is not continued, he said, the company will probably not hire the 25-30 new employees currently in its plans for 2012.

And Clifford and Resch said, most of the 5,000 solar companies in the U.S. are small businesses, so cutting 1603 will hurt them.  About 100,000 people are currently employed in the solar industry, and if 1603 is continued, SEIA projects, it could help create another 37,000 jobs.

Cutting the program could also hurt U.S. competitiveness on a global scale, said Shayle Kann of GreenTech Media. The U.S. generally comes in around third, fourth or fifth in solar installations worldwide, he said.

“The magnitude of growth (in 2012) depends  on whether we will see an extension of 1603,” he said. “It’s a pivotal juncture where the U.S. market stands in regard to global markets. We could be No. 1 but we need the environment to be supportive politically and financially. We need to ramp up.”  

“Solyndra is a convenient excuse for people who don’t want to support renewable energy,” Resch concluded. “Solyndra was one company; you cannot hold an entire industry or a series of industries hostage for the failure of one company.”

I’m working on an article on the local impact of the 1603 program and its potential expiration, so stay tuned.