October 10, 2008

Bailout Bill Also Includes Array of Solar Incentives


While bailing out Wall Street this week, Congress also jump- started the renewable-energy industry.

Tucson solar installers say they expect a big boost in an already booming business with an eight-year extension and expansion of federal tax credits that will save the homeowner installing an average photovoltaic system an additional $7,000.

Investment tax credits included in the financial rescue bill passed by the House and signed by President Bush Friday will be available for an array of renewable-energy systems. The bill is expected to benefit small businesses, manufacturers and large energy producers.

A report prepared for the Solar Energy Industries Association predicts 15,000 new "green" jobs in Arizona over the next eight years.

Under the plan's terms, homeowners can qualify for a federal tax credit that equals 30 percent of a photovoltaic system's cost beginning Jan. 1. The current cap of $2,000 is removed.

In addition, business owners will no longer trigger payment of an alternative minimum tax by claiming the credit, said Jake Stephens of U.S. Solar.

Stephens, who created a Tucson outfit called GreenSun to install systems for small-business owners, had put that business on hold to pursue utility-scale projects with U.S. Solar after his potential customers found that piling up tax credits made them subject to the tax.

"I might try to knock off a few of them now," he said. He said he had already e-mailed one former client Friday.

"Solar is is going to a be a lot more accessible to midsize business owners," he said, "with a five- to seven-year payback situation."

"It really is a comprehensive bill. It covers all the key issues. It's going to do a great deal to improve the economics of residential solar in particular and will allow a lot of huge projects to more forward," Stephens said.

Most utility-scale projects announced this year in Arizona were predicated on the extension of solar investment tax credits.

George Villec, owner of Geo Innovation, said he's now ready to hire more installers for a business that was doing well before Congress made solar even more affordable.

The 30 percent federal credit, combined with utility company rebates and state tax credits, will make it possible to buy a system for a third of its actual cost, Villec said.

Kevin Koch of Technicians for Sustainability said he also expects a lot more business owners to join the handful in Tucson who have gone solar. Koch just completed a commercial system for Brooklyn Pizza Company, 534 N. Fourth Ave.

At 14.6 kilowatts, it is three to four times larger than the average home installation and will provide owner Tony Vaccaro with a third of the power used at his restaurant.

Vaccaro said he's always been "intrigued and enamored with solar power" and was finally in a financial position to install it, taking advantage of $42,000 in utility rebates and state tax credits on the $102,000 system.

Now he's getting ready to call his tax accountant to see if he can also take advantage of the federal tax credit, potentially worth another $30,000.

Vaccaro is hosting a "commissioning" of the system Thursday at 10 a.m. with speeches by the mayor and other officials, a tour and, of course, pizza.

Extension of the alternative-energy tax credits made the Wall Street bailout bill slightly more palatable to U.S. Rep. Gabrielle Giffords, D-Ariz., who voted for the bill.

It will mean an economic boost for Arizona, said Giffords.

Industry-sponsored reports, issued before the current economic meltdown, predicted the extension would generate up to 440,000 jobs over an eight-year period, with 15,000 of those jobs created in Arizona.

"I've given eight floor speeches, sponsored or co-sponsored four bills and ... voted for the tax credit four times," she said in a telephone interview.

Villec, of Geo Innovation, said he sent an e-mail to Giffords Wednesday, saying he'd put plans for expansion of his business on hold if Congress did not extend the credits.

Right now, said Villec, his business is booming, with customers paying about 45 percent of the cost of a solar installation.

With the cap lifted, he said, a 4.64-kilowatt (thousand watt) system that he installs for $31,904 will cost a homeowner $11,805 after federal and state tax credits and rebates from Tucson Electric Power.

Extension of the tax credit was "critical" for solar research and development, Joseph Simmons, co-director of the Arizona Research Institute for Solar Energy, said in an e-mail.

"The kind of capital it will bring to the industry from private sources will be the sufficient boost that the technology needs to become competitive. It's not just the tax savings, but the perception to investors that solar energy will be a great investment," Simmons wrote.

Removing the cap will give a big boost to residential solar installation, too, said Valerie Rauluk, CEO of a Tucson alternative energy consulting firm called Venture Catalyst Inc.

Bigger projects have been proceeding on the assumption that the credits would be renewed this year or next, she said.

But the tax credits are essential to continued development of larger, utility-scale projects as well, she said.

The weakened economy will obviously have an impact on any business, she said, "given the interesting credit situation we're dealing with right now."

"We may very well see a shakeout in renewable energy providers," she said. "The weaker ones may disappear from the scene."

"That may be good. The last thing we need is a solar bubble to match the real estate and the Internet bubble," she said.

Rauluk said, however, that a "mature" sector of the industry will survive.

There are plenty of larger, established solar firms, she said, and the extension of tax credits will make solar and other renewable energy businesses attractive to those seeking a good investment and tax write-offs.

* Contact reporter Tom Beal at 573-4158 or [email protected]

Originally published by TOM BEAL, ARIZONA DAILY STAR.

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