With the price of solar panels falling more than 50 percent last year, what is the impact on the U.S. solar industry as it battles to compete with China? During today's OnPoint, Thomas Kimbis, vice president of strategy and external affairs at the Solar Energy Industries Association, discusses growth in the industry as the fate of renewable energy tax credits remains in flux.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Tom Kimbis, vice president of Strategy and External Affairs at the Solar Energy Industries Association. Tom, it's nice to have you on the show.
Thomas Kimbis: Oh, thanks for having me, Monica.
Monica Trauzzi: Tom, the Commerce Department is expected to make a preliminary ruling on the SolarWorld trade case this Monday and SEIA represents companies on both sides of this discussion. So, sort of where do you come down on this? What's your view on how Commerce should approach this?
Thomas Kimbis: Well, as you said, we represent both sides in that we've got over 1000 companies from across the world. All of them do business in the United States, some of whom are based in China, some of whom are based in the United States. SEIA has taken a fairly neutral position. We have taken a position, which is that we want to see this case resolved as quickly as possible. We think it's in the best interest of the industry globally for it to move forward quickly. At the same time, we went to see the U.S. government and international governments carry out the processes that have been put in place and have been accepted as standard operating procedure. So, we want to make sure that this rules-based system is seen through to fruition.
Monica Trauzzi: So, from where you sit, is there a solution that could benefit all of the parties involved?
Thomas Kimbis: You know, it's difficult to say since we don't represent either one of the parties. I think the best solution here is to look beyond this case, see what may come in the future. And SEIA is working actively with its trade association partners around the world to try to develop better working relationships so that we can avoid these sorts of trade disputes before they actually come to the Commerce Department or to the ITC or to the World Trade Organization.
Monica Trauzzi: The White House released its inter-agency progress report this week and it highlights the fact that renewable energy use has doubled since 2008. Are there trends on the horizon though on the solar front that you think could get in the way of that trend?
Thomas Kimbis: Well, I think the solar, on the solar front we don't see any trends that are going to get in the way of that front. In fact, we anticipate solar growth to be quite high. We think that by 2014, 2015 the United States and China will be the largest users of solar, the largest markets for solar in the world. So, looking at that I don't think solar is going to be getting in the way and I don't know of any other renewable energy technology that will get in the way. We do face barriers, of course. Some of those-the most prominent are financing and state and local barriers to deployment. But solar's future is looking bright, especially in light of the recent reports we've had come out.
Monica Trauzzi: So, if the future looks bright, there's all this discussion about the tax credit extensions. Are those absolutely necessary or will the industry be able to survive on its own without those extensions?
Thomas Kimbis: The Investment Tax Credit, the underlying Investment Tax Credit is absolutely imperative for the success of the solar industry. It's a 30 percent underlying credit that's taken by the end-user. The 1603 program, which is the one that's up for extension, is important given the circumstances of the economy today, which is that basically we don't have very much tax equity in the United States because not too many companies are making profits. What this means is that this Section 1603 program, which has been up for extension, allows companies to take that tax credit they would have already received earlier. So, all it does is shift the tax credit to be taken at the beginning-towards the beginning of the project, rather than at the end. So, it creates a more fluid, you know, the ability to access capital more fluidly. That is important. A report that came out from EUPD research, which is an independent research body, found that 37,000 new jobs would be created by extending the 1603 program by one year. But I think what's most important here is to look at what's happening in the economy and understand that the underlying ITC is what's driving the solar market in the United States.
Monica Trauzzi: We're only three months into the year, but have you seen direct impacts of the expiration of the 1603 at this point?
Thomas Kimbis: We have, but we haven't quantified them yet. It's a little too soon to do that for a number of reasons. One is that there is a Safe Harbor provision so that some projects were able to be, you know, essentially get extended over, that are still being developed in the early part of this year. So, we haven't seen that yet, but we have heard stories of companies, you know, calling on small companies, midsized companies especially, those are the ones that are really benefiting from 1603. The small businesses are the ones who are being hurt by 1603 being taken away, simply because they don't have access to those big banks that some of the large companies do. So we do, we are fielding those calls from the field.
Monica Trauzzi: Renewable energy tax breaks are being tacked onto various bills. We see them discussed, but not with the same fervor that they were in previous years. What are the prospects for seeing these extended and for your industry to continue to benefit from these breaks?
Thomas Kimbis: It's a good question and I don't have a complete answer for you as to exactly what vehicle this amendment could go onto. Obviously, right now we're looking at a transportation bill amendment. However, there could be bills coming across any time during this calendar year. What's tough is we're all victim to, you know, the divisive nature in Congress in Washington today that's, you know, preventing some of these important amendments from moving forward. We're hopeful that if we can't get 1603 as a particular piece of legislation extended, that we'll find another way to increase the ability of small businesses to access capital through some sort of federal vehicle.
Monica Trauzzi: What's been happening with the price of solar panels and what does that mean for the short-term outlook of the industry?
Thomas Kimbis: Yeah, the price of solar panels has fallen dramatically. It's unbelievable. In the last year we've seen the price of panels fall by 50 percent and the actual installation costs fall by 20 percent. And the difference there is that that latter figure would include the labor and all the other components that go along with the panel. The panel itself is becoming more and more of a commodity as it's being built by dozens of companies across the world. So, we're seeing the margins on those panels shrink dramatically, which is, in turn, lowering the price of the system. It's making it challenging for some of our manufacturers, but in the end, it's benefiting the consumers, the homeowners and businesses across America.
Monica Trauzzi: All right, we'll end it there on that note. Thank you for coming on the show.
Thomas Kimbis: Thanks, Monica.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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