Solar Companies Surge as U.S. Tax Credit Brings Early Holiday

  • Congress reaches deal to extend tax credits for five years
  • California upholds payments to rooftop solar customers

Solar companies climbed Wednesday after U.S. lawmakers agreed to extend a key federal tax credit.

In a deal announced late Tuesday, Congress approved an additional five years for the investment tax credit, which is scheduled to end at the end of 2016. It also provided a five-year retroactive extension of the production tax credit, which benefits wind-power developers and expired at the end of 2014.

Extending the ITC has been one of the solar industry’s top lobbying goals this year and uncertainty over its future has been a drag on development. Solar companies got an additional boost from California, where regulators proposed upholding policies that promote the use of rooftop panels, erasing another big question mark.

“The holidays have come early for the solar sector,” Jeffrey Osborne, an analyst at Cowen & Co., said in a research note Wednesday. Both the tax-credit extension and California’s proposed decision will help attract new investment and carry the industry until solar can compete without subsidies, he said. “The two issues have been an overhang on the space for several quarters.”

SolarCity Corp., the biggest rooftop installer, surged 34 percent at the close in New York, the most in three years. SunEdison Inc., the largest renewable-energy developer, climbed 25 percent and panelmaker SunPower Corp. increased 14 percent. They were the top movers on the Bloomberg Intelligence Global Large Solar Energy index of 20 companies, which climbed 7.4 percent, the most since January 2014.

Budget Deal

In Washington, Congress agreed to let the ITC run through the end of 2021 as part of a broader budget deal. The credit will apply to projects that begin construction in that period instead of the current policy that applies to power plants that go into service before the deadline. It currently pays 30 percent of costs, and will gradually decrease.

The PTC used primarily by the wind industry pays 2.3 cents per kilowatt-hour of electricity generated. It will be gradually decreased over the next four years and phased out completely in 2020.

In California, the biggest solar market, regulatory staff rejected Tuesday requests by utilities to increase fees and cut payments for rooftop solar customers. The proposed ruling is seen as a bellwether for how the rest of the country will deal with the rapid emergence of power generated by customers.

‘Strong Signal’

“Combined with the historic Paris climate agreement, long-term certainty for the ITC sends a strong signal to the marketplace that investment in clean energy is the right way to drive continued economic growth and job creation,” SolarCity CEO Lyndon Rive said in an e-mailed statement.

The tax credit extension will spur more than $125 billion in new investments for the U.S. economy, said Rhone Resch, chief executive officer of Washington-based Solar Energy Industry Association.

“Members in both Houses have reestablished America as the global leader in clean energy, which will boost our economy and create thousands of jobs across America,” Resch said in an e-mailed statement.

The solar supply chain is gaining from anticipated development. Enphase Energy Inc., a supplier of inverters used to build solar systems, surged 39 percent, the most since its March 2012 initial public offering. Competitor SolarEdge Technologies Inc. climbed 17 percent.

Shares of wind-power companies also responded positively to the news. Vestas Wind Systems A/S, the world’s biggest turbine maker, rose 4.3 percent to a seven-year high. Broadwind Energy Inc., a U.S. supplier of steel towers for turbines, climbed 4.3 percent.

“This is much better than expected,” Gregory Jenner, a Washington-based partner at the law firm Stoel Rives LLP. “It’s huge for the wind industry because they take longer to develop and build than solar and they’ve got a five-year glide path.”

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