Wednesday 17^th September 2008

The sun may set early on anyone trying to take advantage of expiring solar-energy tax credits this year.

Many solar manufacturers and installers say they can't take on more jobs for 2008 because they're either out of panels or out of time.

"From the manufacturing perspective, we're sold out," said Tom Mueller, a spokesman for BP Solar in Houston.

Residents and businesses throughout the Valley need to install photovoltaic panels this year to take advantage of federal alternative-energy investment tax credits before the credits expire on Dec. 31. The solar tax credit covers 30 percent of a system's cost, but it will drop to 10 percent Jan. 1 if Congress doesn't act after it returns Monday.

Unless orders were put in months ago, few solar installers or wholesalers will have the time or the panels in stock to accept more jobs this year.

The likelihood of taking on a new job right now is low, said Tom Dyer, senior vice president of marketing and government affairs at Scottsdale-based Kyocera Solar Inc.

"He'd be hard-pressed to do something for you unless somebody falls off his list," said Dyer, a board member and former chairman of the Solar Energy Industries Association.

Solar panels have been in short supply since 2005 because silicon, a key component of photovoltaic solar panels commonly installed in homes and businesses, was limited.

With the federal alternative-energy investment tax credits set to expire Dec. 31, installers and manufacturers have reported a spike in demand for solar panels this year.

"It's almost a man-made shortage because everyone is scurrying around to get their jobs done before the tax credits expire," said Ron Kenedi, vice president of Solar Energy Solutions Group for Sharp Electronics Corp., the largest maker of solar panels.

Tucson-based Technicians for Sustainability buys solar panels from Schott Solar Inc. and SunPower Corp. Both makers have told company President Kevin Koch that he will likely not be able to get more panels this year.

"We've pretty much taken up our allotment for the rest of the year," Koch said.

If a business asked Koch to install a 30-kilowatt system, typical size for a commercial job, Koch said he could not take on the project this year.

"I would have to turn them down," he said.

A typical residential installation would take a 3- to 5-kilowatt system, using fewer panels, installers said. So the shortage is more critical for business installations.

Dave Haycock, of All West Energy Inc. of Fountain Hills, said that his company will take on projects one at a time.

"We have a limited supply," Haycock said of solar panels.

Scottsdale's American West Solar, the largest installer in Arizona, has long-term deals to buy panels from Sharp and Kyocera Solar Inc.

But with the increase in demand before the solar credit expires, the company said it cannot take any more orders for 2008.

"We're fully committed for this year," said Krystal Book, a company spokeswoman.

The normal wait time for solar projects is a few months, Book said.

Phoenix's Perfect Power would not have trouble filling orders before the end of the year, but it is not taking any more commercial projects for 2008, said John Balfour, company president.

"We have a plan, we've kept to our plan, and we look like we're going to be right on target," Balfour said.

Solar installers need to make panel orders about four or five months in advance, said Mike Richter, a sales consultant for SolarCity, an installer with offices in California and Phoenix.

"You have to be that much ahead of the game to make sure that your supply line isn't interrupted," Richter said.

"(Solar installers) don't want to go beyond the December 31st deadline, so everybody's trying to jam-pack their orders in before the end of the year," said Kenedi of Sharp Electronics, the largest U.S. producer of solar panels.

The threat of the expiring credit has led Arizona Public Service Co. and Abengoa Solar to put the 280-megawatt Solana Solar Plant near Gila Bend on hold.

Lori Singleton, manager of sustainability initiatives and technologies for SRP, said that she doesn't expect to see many new commercial jobs before the end of 2008.

"If they haven't already got that order in the works, it would be my thought that there's just not enough time," Singleton said.

States offer credits, too

Governments in 28 states sponsor credits in the form of mandatory renewable portfolio standards, including in California, Colorado and Arizona.

States set requirements for public-utility companies to increase renewable energy statewide, and the utility companies in turn pay consumers for the renewable energy that systems produce. Five states have set voluntary renewable portfolio standards.

Both Salt River Project and APS participate in Arizona's renewable portfolio standard, passed in 2006.

Some states also sponsor tax credits. Arizona offers a one-time 25 percent income tax credit available to residences and a one-time 10 percent income-tax credit for businesses that install solar panels.

Still, the federal investment tax credit, set at 30 percent, is important both financially and symbolically, industry insiders say. Regardless of states' credits, solar systems on houses or businesses are too expensive without the federal credit.

"We are coming up on a crisis point," Kyocera's Dyer said. "People will start making business decisions that are counterproductive just because there's no guarantee this will continue after Jan. 1."

One firm's example

Dr. Marvin Borsand of Scottsdale's Body Sculpting Center had Technicians for Sustainability install panels on his business last year for $180,000.

"I was concerned that this could expire because I'm old enough to remember when they expired in the past," Borsand said.

The Energy Tax Act of 1978 established a 15 percent investment tax credit, which fell to 10 percent by 1988.

Borsand received about $82,000 in rebates from the state government and from SRP. The federal government wrote Borsand a check for more than $50,000, reducing his company's cost to install panels to about $40,000.

Borsand said he is happy with his decision to install solar panels, and he wants to see the tax credit renewed.

"If they don't, this whole industry will just kind of take a dump, and there's no reason at this point not to extend them," Borsand said.

Ripple effect

Congress returns Monday, and the solar industry expects members to take up energy policy and the credits in earnest.

Dyer, representing Kyocera and the solar-industry association, worked closely with members of Congress on solar policy.

"Both parties want (the credit) but have not come to a conclusion on how to do it," Dyer said.

Navigant Consulting Inc. estimated in a February study that failure to extend the federal investment tax credit could result in the loss of more than 39,000 jobs in the solar industry throughout the United States.

"If you don't have work that you can do in January, then when do you make a decision on what to do about that?" Dyer asked.

He said if the credit expires, the industry would continue in the United States but would limit growth.

"We're not going to fall off the end of the Earth here, but it will affect the growth and, therefore, investments and jobs," Dyer said.

Japan and European countries like Germany, Spain and Italy offer generous state-sponsored solar tax credits. As the U.S. dollar continues to weaken, and with demand rising in foreign countries, corporations could start allocating more and more panels abroad.

"If you still have Spain and Germany offering big incentives, then you're very likely to see the solar-module supply going to markets where the demand is obviously going to be higher," BP Solar's Mueller said.

Sharp, the world's largest maker of solar panels, said that it will not give up on the U.S. market anytime soon, Kenedi said.

"We believe that the U.S. market will be the largest market eventually," he said.