6. RENEWABLE ENERGY: Stimulus brightens prospects for Calif. solar market (Greenwire, 03/26/2009)

Colin Sullivan, E&E reporter

SAN FRANCISCO -- The federal stimulus package should jolt California's solar power market back to life within the next few months, according to one Silicon Valley CEO.

Lyndon Rive, the co-founder of SolarCity, said yesterday that he expects the reworked investment tax credit for renewable-energy project developers to ignite the state's near-frozen commercial solar market almost immediately.

"It will be day and night," Rive said in an interview. "It's going to really lift the constraints."

The sector has been hit hard this year as banks and other financial institutions have withdrawn to a protective shell. Smaller photovoltaic system developers, many of them based in Silicon Valley, have felt the brunt of the standstill, with financing all but vanishing as the credit crunch took hold.

But Rive and others gathered here for a cleantech conference said a stimulus provision that reworked the renewable energy investment tax credit should draw the banks out of hiding. The law has effectively changed the tax credit into an outright grant, making cash available in lieu of the tax treatment.

Under the previous investment tax credit, renewable energy developers could apply the 30 percent tax credit only to profits as a deduction. But the stimulus, for a period of two years, has made it possible to get the 30 percent back as cash, under a grant program to be administered by the Treasury Department.

Erik Zech, chief financial officer of Real Goods Solar Inc., echoed Rive's hopeful mantra. "The economics are compelling," he said. "I think it's going to start accelerating pretty quickly."

Yet the situation has been so fragile in California that investor-owned utilities have started making a play into financing projects directly, a development that could signal further consolidation in the industry (Greenwire, Feb. 26).

With these events as a backdrop, the renewable energy trade associations lobbied hard for the newfangled investment tax credit, which they managed to push through a conference committee last month despite some late opposition from prominent Democrats (E&E Daily, Feb. 12).

Companies like SolarCity, which is based in Foster City, Calif., stand to gain specifically because their business is pinned to a leasing model that will allow such firms to benefit at the residential as well as the commercial scale. Because SolarCity retains ownership of its residential rooftop installations and rents them to homeowners, the company qualifies for the 30 percent grant, Rive said. Residential installations owned by homeowners directly would not qualify.

Banks and lenders may not yet grasp the implications of the change, but Rive expects the Treasury Department to issue guidelines soon that will make the benefits clear. Applications should be available within 30 to 45 days, and Rive said it will take another month or so for banks to get the picture.

"Once the banks and financial institutions get a handle on that grant program, I don't think equity financing will be an obstruction to growth," he said.

John Woolard, CEO of Oakland-based BrightSource Energy Inc., appeared to agree and lauded lawmakers for hatching a "well-thought through" initiative. He also said the recent downturn may have served to separate the bad projects from the good, whether in PV solar, solar thermal or wind.

"The marginal projects, those are all dead and should be," Woolard said. "There was a little bit of frothiness in the market a year ago."

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