As Solar Pushes for U.S. Tax Break, One CEO Says Don't Botherby
Cycle of expiration-extension creates instability, Berger says
Most solar developers want to expand credit dropping next year
Congress is debating whether to renew an investment tax credit that for nine years has helped put solar panels on rooftops across the country.
But John Berger, the chief executive of Houston-based residential solar-power installer Sunnova Energy Corp., is on a one-man mission to get them to drop the idea.
In letters to tax writers and meetings with lawmakers Thursday and Friday on Capitol Hill, Berger argued that the investment tax credit has served its purpose in jump-starting the solar industry and cycles of expiration and extension would drive away investment. He said Congress should let sun set on the tax credit that’s scheduled to be reduced next year to 10 percent for commercial projects and nothing for residential customers from the current rate of 30 percent of the value of a solar system.
“This was supposed to push the industry off the dock; it did that,” Berger said in an interview Friday. "We’ve been able to drive down the cost far faster and far more than anyone thought. Do we really need more taxpayer dollars? No.”
Berger’s view sets him apart from the majority of solar developers, installers and manufacturers in the U.S. who insist that continuing the credit is essential to sustain growth in the sector, especially as it competes against low-cost natural gas.
If the tax credit isn’t kept at current levels beyond next December, installed solar capacity is expected to fall by nearly 8 gigawatts from 2016 to 2017, and 100,000 U.S. jobs tied to the sector may be lost, a Bloomberg New Energy Finance analysis completed for the Solar Energy Industries Association in September found.
Sunnova “may be doing solar installations, but by no means do they represent what’s actually happening in the solar industry or what the overall industry needs with respect to the tax code,” said Rhone Resch, president of the Solar Energy Industries Association. “This is a good policy. It works. It’s deploying solar.”
Fourteen chief executives from San Francisco-based Clean Power Finance, Salt Lake City-based sPower, financing firm Sol Systems and other companies in the trade group fanned across Capitol Hill this week to amplify that message, as lawmakers consider changes to the investment tax credit as part of a broader “extenders” package.
The solar trade group backs legislation from Representative Mike Thompson, a Democrat from California, that would extend the tax credit for residential and commercial deployments by five years and broaden it so projects could qualify for the credit as long as construction begins before the expiration date. Under the current approach, solar projects must be in service by December 2016 to take advantage of the credit.
“Across the board, we’re finding that the industry still needs the investment tax credit in place,” Resch said.
Complicating the issue is resistance from fiscal conservatives, including groups such as Citizens Against Government Waste and the American Energy Alliance, who argue renewable tax credits are subsidies that unfairly prop up the power sources. "The U.S. government should not be anointing certain niche industries over others," CAGW president Tom Schatz said. "It is time for the solar energy industry to pass muster in the marketplace without subsidies."
Berger and privately held Sunnova are breaking from the pack, but other solar companies -- especially those that are publicly traded -- have made clear to investors that they will be fine if the tax credit declines. For instance, SunPower Corp. Chief Executive Officer Tom Werner told analysts in October that improvements in efficiency can offset a reduction in the tax credit. Lyndon Rive, the chief executive officer of SolarCity Corp. told investors in October the residential installer will have a positive cash flow by the end of 2016 even if the tax credit drops as planned.
Berger sees the investment tax credit as blunting competitive pressure to pare costs and blocking the industry from tapping into billions of dollars of capital from commercial banks and oil investors.
He doesn’t want solar to fall in the same trap as wind developers that are perennially fighting to prolong the life of a production tax credit –- a vicious cycle of renewal and expiration that turns off investors craving certainty. Congress habitually waits until the last minute to extend a host of expiring tax credits known as "extenders" because of the ritual.
Berger’s message to Congress regarding extending the tax credit: “Don’t do anything.”
“By doing something, you create uncertainty. That’s been the affliction on the wind industry, and we don’t want that.”