Remember those investment tax credits the solar industry needed to keep consumer demand inflated? Well, it didn't take long after passage for at least one company to change its own policy for profit's sake.
Xcel Energy
Among the many parts of the tax credit, Congress eliminated the $2,000 tax credit cap on residential solar systems, replacing it with a tax credit of as much as 30% of the total cost of the system. Xcel seems to be using that as a reason to reduce the rebates it offers to customers.
In its letter to the Colorado Public Utilities Commission, Xcel said that because the customers are receiving a greater benefit from the new law, the utility can cut its rebate program, and consumers would not see their overall costs increase by much. Some could argue that it's using the federal tax credit to boost its own earnings.
There are many other problems with the hopes being pinned on the investment tax credits. While Suntech Power
Debt financing accounts for large portions of how facilities are built, but the credit freeze, despite massive infusions of cash into the system, means there might be little funding available to get solar plants going. Even huge conglomerates such as General Electric
With most banks operating at a loss this year, they won't be able to take advantage of the tax credits, and they might not be inclined (or able) to finance projects for a while. That would put them at odds with companies such as SunPower
Worse, Lehmann Brothers had become the primary underwriter and lender for many solar-energy companies. With its collapse, many companies may find themselves in trouble, too. Evergreen Solar
Moreover, the industry may soon face pricing pressures; spot prices for solar cells could fall, and keep falling. Though vendors contend that prices are firm, they may come under pressure if a discounting atmosphere prevails.
While many solar companies feel optimistic about the benefits of the tax credit, they may face cloudy days ahead. Xcel's actions could set a precedent for other utilities to follow. As the credit crisis continues to force people to look for ways to save, including lowering their thermostats -- which would lead to lower utility income -- the incentive to make up any lower revenue by reducing rebates may prove tempting indeed.
Shine a light on these related Foolish articles: