Tax credits brighten US' solar future
The financial crisis may slow growth in the US solar sector, but investment incentives should ensure expansion continues
Once again, Congress has saved the US solar energy industry. Considered the most important federal policy ever enacted for the solar industry, an $18bn incentives package signed into law by President George Bush in October should generate at least $325bn in private-sector investment, says the Solar Energy Industries Association. The act extends the 30% federal investment-tax credit for both residential and commercial solar installations for eight years.
A component of the $0.7 trillion Emergency Economic Stabilization Act of 2008, which was designed to support the country's struggling financial system, the bill has also eliminated the $2,000 cap on tax credits for residential solar-electric installations, as well as the ban on utilities benefitting from the tax credit. In addition, it has authorised $0.8bn for clean energy bonds for renewable energy-generating facilities.
More good news for the industry could be forthcoming from the new administration. President-elect Barack Obama is likely to offer additional incentives for solar energy to fulfil his campaign promise to reduce carbon dioxide emissions by 80% by 2050 and to invest $150bn in new energy-saving technologies. He has also called for almost a tripling of the percentage of the country's electricity that is generated by renewable sources by 2025.
Incentives are not available just at the federal level. More than 30 states have required that utilities generate a percentage of their power from renewables in the next five to 10 years. As a consequence, the Solar Electric Power Association says utilities will become the largest customer base for solar power. These incentives are likely to accelerate development of an industry that has already experienced rapid growth. The amount of solar power capacity installed in 2007 was double that installed in 2006. To date, 27 utility-scale solar projects, with a combined capacity of 5.4 gigawatts are under development.
California represents the largest US market for solar power. Pacific Gas and Electric (PG&E) alone has within its service territory more than 50% of all grid-connected photovoltaic (PV) systems in the country. Building on that base, in August, PG&E announced plans for a 550 megawatt (MW) PV plant with Optisolar and a 250 MW project with SunPower, both to be built in phases between 2010 and 2013; combined, they represent the largest single PV commitment from a power utility in the world. By comparison, PV energy projects connected to the grid totalled only 473 MW at end-2007.
Last summer, Ausra opened the US' first plant for manufacturing solar-thermal power systems in Las Vegas, Nevada. The state is home to Spanish Acciona's $260m, 75 MW Nevada Solar One facility, the world's third-largest concentrated solar plant, which started up in June 2007. But the 280 MW Solana Generating Solution, a plant being developed by another Spanish company, Abengoa, about 70 miles southwest of Phoenix, Arizona, will dwarf the Nevada Solar One; it is scheduled to start up by 2011.
Since 2005, the Bureau of Land Management has received more than 130 applications to build solar facilities, in California, Nevada, Arizona, Colorado, New Mexico and Utah; the proposed projects would cover about 1m acres. But although construction continues, the economic crisis, lower energy prices and energy-market volatility threaten to slow the industry's growth rate – the 30-fold rise in capacity predicted by some forecasters between 2009 and 2016 seems unlikely.
In its most recent quarterly filing with the Securities and Exchange Commission, for example, panel maker Evergreen Solar said it might not be able to secure the financing it needed for a $400m production facility required to fulfil its contractual obligations. The company was burned by a loan of almost 31m shares of its common stock to Lehman Brothers, which has since filed for bankruptcy protection – Evergreen has sued the bank to recover its losses.
Plummeting oil and gas prices also present a challenge for solar developers, by reducing the motivation for utilities and consumers to purchase higher-cost energy from green projects. But the incentives offered by Congress should put solar on a competitive footing with its conventional counterparts and set the building boom back on track.
US wind industry set for another record year
GROWTH in the US wind industry continues to accelerate: 2008 was the fourth consecutive year of record capacity additions. In the first nine months of the year, over 4.2 gigawatts (GW) of capacity was installed, bringing the total to over 21 GW, according to the American Wind Energy Association (AWEA). A further 8 GW of capacity is due to start up by early 2009. By comparison, 5.329 GW of capacity was added in 2007 – up by 46% from 2006.
In the first three quarters of 2008, Texas, the country's wind-power leader, had installed 693 megawatts (MW). The state has 6.297 GW of wind capacity, more than any country except Germany, India and Spain. At the end of the third quarter, another 2.47 GW of capacity was under construction.
Following the extension of federal production-tax credits for wind energy until the end of 2009 and in light of hopes for a favourable environment for renewables under the administration of president-elect Barack Obama, plans for several new projects have been announced. These include at least five – two each in Texas and North Dakota and one each in South Dakota and California – with a capacity of 1 GW or larger. The US' largest wind farm is FPL Energy's 736 MW Horse Hollow Energy Center in Texas.
Potential projects include a 3 GW plant near Amarillo, Texas, to be developed by Shell WindEnergy and TXU subsidiary Luminant. While Hartland Wind Farm plans to begin constructing a $4bn, 2 GW facility in northwestern North Dakota in autumn 2010; and FPL Energy hopes to build a $2bn, 1 GW facility in west-central North Dakota.
BP, which plans to raise its US wind capacity to as much as 15 GW, has joined forces with Clipper Wind Power to develop one of the world's largest farms, the 5.05 GW Titan project in South Dakota. And in March, Southern California Edison began building the 4.5 GW Tehachapi Renewal Project, north of Los Angeles, which should start up in 2013.
But delays in extending the federal wind production-tax credit and the financial crisis will probably slow growth for the next few years, says AWEA. Adding to developers' problems is a 50% fall in gas prices since the summer, making wind less cost competitive as a power source. As a result, oilman T Boone Pickens has postponed plans for a 4 GW wind project in Texas; and FPL Energy has cancelled $1.3bn worth of new projects.
In the long term, however, the wind industry is likely to weather the storm. The Department of Energy claims the country has enough affordable resources to generate at least 20% of its electricity from wind.