(CNSNews.com) – Federal subsidies have created a massive “green bubble” in the solar industry that is in danger of bursting when they expire next year, leaving taxpayers on the hook for billions of dollars, according to a report by the Taxpayers Protection Alliance (TPA).
Homeowners and businesses that install a solar energy system are currently entitled to a 30 percent Solar Investment Tax Credit (ITC), which was initially passed by Congress in 2006 and extended for another eight years in 2008.
However, the ITC will drop to 10 percent for commercial and zero for residential properties on Dec. 31, 2016.
And even members of the heavily-subsidized solar industry, which provides less than one percent of the nation’s electricity, are worried that it cannot stand on its own without government handouts.
“The reality is that we will lose 100,000 jobs if we lose the ITC — and these are conservative numbers. Ninety percent of solar companies will go out of business,” Rhone Resch, executive director of the Solar Energy Industries Association (SEIA), told participants at PV American 2015 in March.
SEIA spokesman Ken Johnson said that lobbying Congress to extend the ITC beyond 2016 is the group’s “top priority.”
According to the TPA report, entitled From Washington to Wall Street: How Government Policies are Skewing Solar Investments, solar companies are currently “bundling and securitizing” third-party solar leases, similar to the activity that triggered the housing market collapse.
“Since most homeowners do not have enough tax liability to utilize the Investment Tax Credit and some state incentives, the leasing company can take advantage of subsidies the average homeowner cannot,” the report explained.
“Solar leasing companies then take hundreds or thousands of leases and PPAs [in which the homeowner pays the company for the solar power produced] and bundle them together to offer them to investors (banks, insurance corporations and corporate investors) as asset backed securities, using the homeowner’s lease or PPA payment to service the debt.”
But the report pointed out that after 23 years, production of wind power “dropped off significantly” when a similar $12 billion annual federal wind production tax credit was set to expire, warning that “solar could well suffer a similar fate.”
“Much like the government-created housing bubble and subsequent financial crisis, handouts at the federal and state level are creating a solar bubble that taxpayers are propping up, and it will the taxpayers and investors who take the hit when the industry comes crashing down,” the TPA report predicted.
According to a March report to Congress by the U.S. Energy Information Administration (EIA), “the total value of direct federal financial interventions and subsidies [to the energy sector] decreased 23% between FYs 2010 and 2013, declining from $38 billion to $29.3 billion” even as domestic energy production “rose 10% from 73.7 quadrillion Btu in FY 2010 to 81.1 quadrillion Btu in FY 2013.”
However, during that same time period there was a $4.2 billion increase in solar subsidies, “from $1.1 billion in FY 2010 to $5.3 billion in FY 2013…reflecting a large increase in the installation of solar facilities utilizing the ARRA [American Recovery and Reinvestment Act of 2009] Section 1603 grant payments or the 30% Investment Tax Credit.”
TPA calculates that the total amount of federal subsidies, including loans, grants and tax incentives, amounts to about $39 billion annually in addition to generous state and local subsidies.
Yet despite these massive government subsidies, firms such as SolarCity, the nation’s largest solar energy provider, and other solar installation and leasing companies are operating at a loss,” the report points out.
“We’re concerned that taxpayers and consumers are going to be caught in this web. Because homeowners will be caught." TPA president David Williams told CNSNews.com.
"Because if a company goes bankrupt, who services those panels, who services the house to make sure that the panels are working correctly, what happens to the lease or to the loan, however they purchased these panels? Taxpayers.
"Because Congress has this penchant for bailing out companies, big and small. And I think that if the bubble does burst, you’re going to have a lot of members of Congress who don’t want to accept the failure of green energy and make sure that the people that did get these panels, and that they would actually prop up these companies with taxpayer funds,” he said.
