Solar, Wind Shares Jump as U.S. Nears Deal on Tax Credits

Source: By Alex Nussbaum Brian Eckhouse, Bloomberg News • Posted: Tuesday, December 15, 2015

Shares of U.S. clean-energy companies jumped Tuesday as Congress neared a deal that would revive or extend tax credits for the wind and solar industries.

SunEdison Inc., the world’s biggest renewable-energy developer, rose 13 percent at the close in New York while rooftop solar provider Sunrun Inc. gained 4.3 percent. Wind-farm builder Pattern Energy Group Inc. climbed 4 percent.

While a deal still isn’t certain, Republicans and Democrats are discussing five-year renewals of the two chief clean-energy subsidies in exchange for an end to the 40-year-old ban on U.S. oil exports, two energy lobbyists familiar with the negotiations told Bloomberg. The most significant wind credit expired last year while the tax credit for solar is scheduled to be phased out at the end of next year.

Shares in renewable energy companies have “been discounted because of the uncertainty,” Michael Morosi, a solar industry analyst at Avondale Partners LLC, said in an interview. “A full extension will definitely be good for all the names in the U.S.”

SunPower Corp., the second-biggest U.S. solar manufacturer, rose 4.9 percent, and First Solar Inc., the biggest, gained 2.4 percent.

The fate of the renewable subsidies, opposed by some Republicans as corporate welfare, is still holding up a final deal on the federal budget, U.S. Senator Orrin Hatch, a Utah Republican, said in Washington.

Tax Credits

The federal production tax credit used primarily by the wind industry pays 2.3 cents per kilowatt-hour of electricity generated. To qualify, projects had to begin construction by the end of 2014.

The investment tax credit reimburses 30 percent of the cost of solar farms, and is set to end for most projects after 2016.

“It’s the most important policy in the country for renewable energy,” Bryan Miller, vice-president for policy at San Francisco-based Sunrun said in a telephone interview. Along with rules requiring utilities to buy power generated by solar and wind arrays, the credits are “key bricks of the foundation” for both industries. “If you take away either, the foundation crumbles.”

Some renewable companies have said the need for these tax breaks is fading as prices fall and the technologies become more competitive with electricity from fossil fuels. At the same time, other federal policies such as the Obama administration’s Clean Power Plan are creating new incentives for renewable energy.

Yet wind and solar developers still need certainty and removing the tax credits immediately would hurt, said Mike Garland, CEO at Pattern, also based in San Francisco. The credits have expired or come near death before, only to get periodic reprieves, spurring a series of booms and busts.

“If you don’t have a transition, demand drops precipitously,” Garland said by telephone. “Jobs are lost, manufacturing plants are shut down. It’s ridiculous to have that kind of cycle.”