Colorado solar industry battles supply chain issues, coronavirus scares as it faces decreasing tax credits
Colorado’s solar industry, among the country’s strongest, is joining forces with solar companies nationwide to push for extension of tax credits so they can finish projects being slowed or put on hold by the coronavirus outbreak.
Concerns about not getting solar panels and other components from Asian countries in time have eased somewhat as China reports progress in fighting COVID-19, the highly infectious disease caused by the new coronavirus, and starts firing up idled manufacturing plants. Other countries, including South Korea and Malaysia, have helped keep the supply chain rolling.
However, solar companies are still concerned about manufacturers being able to deliver what they need in time to qualify for the federal investment tax credits. Companies are also facing hurdles as local governments shut down or delay inspections.
The Solar Energy Industries Association has asked Congress, as it looks at helping U.S. businesses, to extend the federal investment tax credits. Another request is to “monetize” them to give customers and investors the option to take a direct payment in place of a tax credit.
The organization also wants its workers to be deemed as essential to the economy so construction can continue as more communities and states narrow the activities allowed. A stay-at-home order issued Tuesday by Denver Mayor Michael Hancock exempts construction.
Another national business organization, the Advanced Energy Economy, is urging a permanent switch to direct payment in place of a tax credit, which it called “no-cost” because it would swap out foregoing tax revenue for a budgetary expenditure.
“This was done, on a temporary basis, in response to the 2009 Great Recession, with great success,” according to a statement Monday by the organization.
In February, Colorado solar companies were talking about not having enough workers to fill jobs in the expanding industry. The annual survey by The Solar Foundation said solar jobs in Colorado rose by nearly 5% in 2019 to 7,174 jobs. Nationally, the industry saw a 2.3% increase.
But the SEIA said in a recent letter to Congress that the industry, which employs 250,000 nationwide and generates nearly $19 billion annually in infrastructure investments, is seeing cancellations of up to 30% of residential work in some markets. Sales have plummeted in areas where people have been ordered to stay home, according to the trade group.
It’s important to keep employees and others safe, said Mike Kruger, CEO and president of the Colorado Solar and Storage Association.
“I feel confident that consumer demand is enough that we’re going to be OK,” Kruger said.
The forecast of “OK” is a far cry from the 46% jump in development that Wood Mackenzie Power and Renewables, a global research and consulting business, said could happen this year. However, Kruger said the solar industry hasn’t taken the kind of hits other sectors have.
“This is nothing like our friends in the restaurant and hotel industries,” Kruger said. “Within the solar industry, I think we can keep people employed and working safely.”
A key to that happening might be federal investment tax credits. In 2019, customers and investors could deduct 30% of the cost of installing residential and commercial solar systems. The credit decreased this year to 26% and will drop to 22% in 2021.
Starting in 2022, the tax credit for commercial projects drops to 10% and disappears for residential systems. A 4% drop in the credits equates to $160,000 per 2 megawatts, Kruger said.
The SEIA held a webinar last week for solar companies nationwide to tackle questions such as what can be done if a project qualified for the 30% tax credit in 2019, but problems along the supply chain held up equipment and delayed completion of the work.
The federal investment tax credit was established by the Energy Policy Act of 2005 and has been extended several times as demand for more renewable energy has grown. Utilities and communities are adding more solar and wind energy to their systems to meet goals for renewable energy and reducing greenhouse gas emissions.
David Amster-Olszewski, CEO and founder of Denver-based SunShare, a residential community solar provider, said uncertainty and disruptions along the supply chain have created more pressure as the industry faces a step-down in tax credits.
And coronavirus has created new challenges. SunShare employees have changed how they talk to prospective customers, which is usually door to door or in community meetings. Those conversations now take place by phone.
The company is adding positions to help with sales, hoping to reach out to displaced hotel and restaurant workers. Amster-Olszewski said the company is also giving gift cards for local businesses to new subscribers to use once businesses reopen.
As the solar industry tries to keep projects going and people employed, local governments are halting inspections and not accepting new plans and permits. Jason Sharpe, CEO of Boulder-based Namasté Solar, said he understands concerns about public health. He has sent a letter to several different jurisdictions to suggest a workaround: virtual inspections, using video conferencing.
Places in California are conducting virtual inspections and officials in Tucson, Ariz., have adopted the method as routine practice, Sharpe said. It would be a way to ensure the safety of inspectors while helping companies maintain operations as much as possible during the pandemic, he said.
Last year, the solar industry dealt with tariffs on solar panels made in China, which drove up prices 30%, Sharpe said.
“Now we’re faced with the loss of the (tax credit),” he added. “There are certainly a lot of headwinds.”
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