With Congress overlooking renewable energy tax credit extensions during its final days in session for the year, what are the next steps for the credits and renewable industries? During today's OnPoint, Rhone Resch, president of the Solar Energy Industries Association, explains how a lack of the 1603 Treasury grant will impact investments in the solar sector. He also previews the outlook for the extension of other tax incentives that are set to expire next year.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Rhone Resch, president of the Solar Energy Industries Association. Rhone, great to have you back on the show.
Rhone Resch: Thank you, Monica, for having me.
Monica Trauzzi: Rhone, it's been a tough climb for the renewable energy industry on tax incentives this year. Senate Finance Chair Max Baucus says he plans to take up tax credits at the beginning of next year.
Rhone Resch: Right.
Monica Trauzzi: But the industry was really hoping to get this resolved sometime this month. What's your take on this new timeline and the fact that we're not going to see an extension this year?
Rhone Resch: We're disappointed. I represent about 5000 businesses in the United States, most of them are small businesses who've been using the 1603 Treasury Program very effectively. This program has supported over 22,000 solar projects across 48 states and so we've gotten to a point where this is an effective job creating mechanism that's about to expire. So, here you have one of the fastest growing industries in the country, we're about to see a significant drop-off when this program expires at the end of the year, so we're disappointed. But, obviously, we're working within the Congress is timeline. We'll be back here in the new year and hopefully it will get it extended.
Monica Trauzzi: Do you think that there is a majority of support in Congress for the renewables industry and these continued tax extensions?
Rhone Resch: You know, part of the problem, I think with the approach the Congress is taken towards renewables, is they're giving these one year, two-year kinds of extensions rather than making them over a longer duration and then curtailing them after you don't need them. The 1603 program was created to deal with a very tough economic climate where you didn't have enough tax equity in the market to support growth of these industries. Well, this program is still needed today because you don't see those tax equity players have come back into the market yet. So, here we have a very effective program that is absolutely critical that we keep going. I think, in the long run, what you see is that Congress understands this is good policy. This kind of program creates jobs. I'm seeing, you know, development in my district in rural Nevada or in Colorado or in Texas and I never thought the renewable industry would be in my home state. So, you know, here you have a program that's effective and is really supporting job creation throughout United States. Again, difficult to deal with these short-term durations though.
Monica Trauzzi: 1603 brought some impressive numbers for Q3 for the industry. How do you think a lack of that program might affect future growth?
Rhone Resch: Well, it's important to point out the good things that are happening in solar industry today. We grew by 140 percent year over year in the third quarter. We installed about 450 megawatts just in the third quarter. That's more than we installed in the entire year of 2009. So those small businesses, who maybe they're electricians or homebuilders who have gotten into the solar industry, are seeing their business grow and thrive. The big question is what happens January 1? What happens 12 days from now when this program expires? I think for small businesses they're going to find it extremely difficult. If you're a large business you can go to Wall Street and get some tax equity for a 100 million or a $200 million project, but if you're a small developer who's doing 100,000, $200,000 projects, you don't have the ability to go to Wall Street. So they're the ones who are going to be hurt most. We estimate that a one-year extension of this program will create 37,000 additional jobs in the solar industry alone. None of those jobs are going to be created unless 1603 is extended.
Monica Trauzzi: The industry performed at slightly lower than expectations for the year. How do you account for that? Is it the uncertainty that exists right now?
Rhone Resch: Well, growing at 140 percent year over year is pretty good. We're the fastest growing industry in the United States today and I think the other great news is that we've seen the price of solar come down dramatically. As we have scaled up the industry, the cost of solar panels has come down by 40percent in the last year alone. So there's almost no better time to go solar than today. And I think a lot of people are kind of looking at their energy bills going through the roof and saying, hey, solar has come down. It's more cost effective. There's new business models where I don't have to pay them any money upfront. We're going to invest in solar now. So, I would say actually we've done extremely well as an industry, even in these tough economic conditions, in order to grow all market sectors.
Monica Trauzzi: So, with all of this great progress then, why does the industry continue to need these incentives?
Rhone Resch: Well, as you know, Monica, every single sector of the energy industry is built on policy and built on some form of support. For the solar industry we have an underlying 30 percent tax credit that's in place out through 2016. But if you can't use those tax credits to develop your project, you have no ability to finance that project. So the 1603 program was created to address the inadequacies in the market. Those inadequacies still exist today unfortunately and so what I think ultimately is critical is that we create the policies for renewables that are similar to what you see for the oil and gas industry, which are permanent incentives. Or, you know, the kinds of policies that last long enough so you have business certainty, especially for proven job creators like solar.
Monica Trauzzi: Have you noticed a shift in tone in Congress towards renewables and just the outlook for the role that renewables will play in our energy policy?
Rhone Resch: There's no doubt. I mean, you see congressmen starting to talk very positively about solar, not in the future, but today. New factories being opened up throughout the United States, large-scale projects that we couldn't even dream of five years ago are now under construction and, frankly, almost everybody knows somebody working in solar today. That's a big difference from where we were just a couple of years ago. So, we've made a very aggressive transition from being kind of a nice, cute, you know, technology or an issue really into an industry, an industry that employs over 100,000 people in the United States and, as I mentioned, is the fastest-growing industry in this country. And we expect to add another 30 to 40,000 this next year alone, if we have that policy certainty.
Monica Trauzzi: I want to shift gears slightly and talk about the role that China is playing in the U.S. solar industry. Do you think that the U.S. industry is disadvantaged because of China's production of solar technology and its exportation of solar technology?
Rhone Resch: Well, we have a global marketplace for solar, meaning we export and import products here in the United States. In fact, in 2010 we were a net exporter of solar equipment, products and final-finish product, to the tune of having a trade surplus of over $2 billion with the rest of the world. In fact, we were a net exporter to China. Now, what we're seeing is the major investment in new manufacturing of the finished product is occurring in China. And so they've scaled up their manufacturing and lowering their per-unit costs so that they are able to compete globally. Now, unfortunately, we haven't made that same investment in the United States for a lot of companies and so competing with a lower cost product is proving very, very difficult. It's exactly what we saw with Solyndra, where here you had a technology and a business model that was based on a price point in the market. That was good 2008 and 2009 numbers. Well, as I pointed out, the price of solar has come down 40 percent in this last year alone, so you have to be efficient in your manufacturing. You have to lower your costs in order to be cost competitive. And for some companies in the United States, they're not able to do that. A the United States, they're not able to do that. But the same holds true for some companies in China and in Europe and in other places. So, as the cost comes down for solar, there are going to be some companies that go out of business. But, in the long run, that's healthy for us to expand the use of solar and ultimately deliver clean electricity to the customer.
Monica Trauzzi: All right, we'll end it right there. Thank you for coming on the show.
Rhone Resch: Thank you for having me.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
[End of Audio]