A long-term extension of the solar investment tax credit is vital
Joe is correct to point out that solar energy is not a monolith — but he’s got the categories wrong. The relevant division is not between technologies but markets.
Market No. 1 is distributed generation solar — that is, solar sited on the customer side of the meter, serving on-site load. Think rooftops. This market will be served almost exclusively by photovoltaics (for electricity — hot water is another case) — and the relevant cost comparison is the retail price of electricity, not wholesale generation values.
Market No. 2 is utility-scale solar — that is, central station generation for wholesale power. Think big plants in the desert that sell electricity to utilities for further distribution and sale to their customers. The relevant cost comparison is the future price of non-renewable alternatives, such as coal. This market will be served by many different technologies, including solar thermal electric (from parabolic troughs to power towers) to concentrated photovoltaic to dish Stirling engines to thin film solar of various flavors.
This distinction is actually pretty important. First, for cost comparison purposes, rooftop solar photovoltaics are not competing against wholesale coal. Instead, PV competes against the delivered, retail price of electricity. Big difference. Once PV gets to grid parity, the market can thrive without subsidy. Both Sunpower and First Solar have made credible cases for reaching that point — assuming the market continues to grow — in the next 5 years.
Secondly, the policies necessary to grow these markets, respectively, are quite different. For distributed generation, it’s not just cost but removing regulatory barriers. For more, see this blueprint [PDF].
For utility-scale solar, the policy framework is a combination of state renewable portfolio standards, tax policies, transmission reform, and attention to land access.
Critically, we absolutely need a long-term extension of the 30 percent solar investment tax credit, currently due to expire at the end of the year. California utilities have signed about 3 gigawatts of contracts with utility-scale solar projects, and the queue of project developers working on deals is easily 10 times that amount. Arizona Public Service just signed a contract for 250 MW of parabolic troughs with Abengoa.
None of those projects will go through without a long-term extension of the ITC. It’s like a 30 percent-off sale for solar. A short-term extension just won’t do — what with all the transmission and permitting and deal-making work, these projects have about a 5-year construction window, and unless there is long-term certainty, they’re just not going to be able to get the necessary financing.
The Senate and House have each passed different versions of the ITC extension. The House version pays for it by taking away tax breaks to the oil and gas industry — which can’t pass the Senate. The Senate version doesn’t include payment mechanisms — which is unappealing to most of the House, especially the Blue Dog Democrats.
So there we are: a major new source of carbon-free electricity, ready to be put into service to humanity. All that’s needed is Congress to get it together on this one little thing. So close, and yet so far away …