Market Carnage Killing Solar And Everything Else That's Green
by Lloyd Alter, Toronto on 10. 7.08
Last week the Renewable Energy Tax Incentive was signed into Law and Matthew predicted that the renewable energy industry would come out ahead. He quoted the VP of Sharp Solar: "The solar industry is now scaling up to bring down manufacturing and installation costs, build its infrastructure, grow public awareness, and attract customers."
The Wall Street Journal is not so sure. Keith Johnson in the Journal notes that last week, for the solar power industry, champagne was the order of the day. Now its hangover time. He writes:
"Optimism reigned on Friday after Congress and President Bush inked an eight-year extension to clean-energy tax credits which should help solar power especially. The new law gives homeowners serious help in installing their own solar-power arrays, and for the first time opens up the tax credits to power companies.
The combination was meant to herald a new era of big solar-power rollout. Or, as Lyndon Rive, chief executive officer of SolarCity in San Francisco, told The Wall Street Journal: “The solar industry has been waiting 30 years to be able to offer parity with grid prices. Now we’re able to offer it.”
Headwinds in the rest of the economy—and some potential impacts from the new law—appear to be to blame for the sector’s woes. Now that homeowners can finally get tax breaks for 30% of home-solar installations—breaking down hefty upfront costs, one of the biggest barriers to solar power—the credit crunch means homeowners are struggling to land loans to cover the other 70% of the cost of installation. " ::Wall Street Journal
Nobody is going to get a loan when their house is already worth less than their mortgage, so innovation, alternative energy and green renovations will require cold, hard cash from rich purchasers. Everyone else will just have to wait. As the Journal concluded: "Clean energy may yet have its day in the sun—but as long as the financial-market turmoil lasts, it isn’t going to be an easy ride for anyone."
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I'm a PV installer in Vermont and I'm still optimistic. One would expect the wealthy to support green energy (or at least I did) but for the most part it is middle class people. Now that the financial markets are going down the crapper renewable energy is becoming a more attractive investment for people who can't invest their money elsewhere. If you're financially secure and don't want to lose your money to inflation while it sits in a savings account, solar offers a good alternative.
Saw Harish Hande of India's SELCO (Solar Electric Light Company) at MIT today. He said that in 2004-2005, his business of providing small solar lights for the poor in Karnataka and Gujarat was almost priced out of the market by the introduction of handsome incentives in Germany. Indian PV manufacturers found it more profitable to sell to wealthy Germans than to Indian villagers. He believes that the same crimp in supply and rise in prices was felt throughout the developing world in the soalr sector.
I think the main reason for the slight decline in the alternative energy sector is this recent bailout, which is causing major dips in every sector in every market in every country (not just in banking). The fact that the government supported the very companies that have ruined this world for the past 50-100 years is appalling; this is the biggest crime I've ever seen committed since suburbanization and the destruction of inner city neighborhoods for six-lane highways.
Just yesterday I walked past a bank here in DC offering home equity loans at prime minus 1%. This whole economic mess is based on the fact that just a small percentage of homes are worth less than their mortgages. The percent happens to be higher than anyone planned for, but it's still pretty small. Most people can still get home equity loans if they want them. So...solar installers should still be happy.
I'd consider installing either solar or wind turbines, but since the bailout passed the stock market has plummeted. That means I now have to hold on to stocks for a while until they go back up in order to sell for a profit. But of course those would be taxable capital gains. And we all know how Obama feels about taxing capital gains!
This is temporary. Everybody please keep your eye on the bigger picture: much of the energy crisis and environmental degradation is due to mismanagement of the conservative governments. We NEED to see this whole ugly mess come to the surface, to expose the mistakes of these policies, of externalizing, of overconsumption. I don't mean to make light of this situation, but there is definitely a few positives that will come out of it- reform and new attitudes. Things are going to get even worse than they are now, but they will get better if we can just LEARN FROM OUR MISTAKES.
We're getting quotes right now, and are decidedly middle class & 7 years into a 30 year mortgage.
Due to numerous bank mergers/takeovers, we now bank with Chase, who now owns our mortgage via WAMU.
And we must get 3 or 4 home equity offers every month - I suspect it has more to do with our credit than anything else, but obviously money is out there to borrow, and I can't imagine why a bank would turn down a loan for solar, which has a proven (and high) ROI value.
As I've been convincing my wife, what possible downside is there if you take out a modest equity loan that results in a positive cash flow due to the energy savings being higher than the monthly loan payment? It is beyond unlikely energy prices are going anywhere but up, so the financial common sense aspect just increases with time.