The Government Has Solar’s Back – Leaves the Public Paying the Bills

Profit Opportunity: The Government Has Solar’s Back
By Christian Hill   [Comments by Wes Waddell]

[The Public is Left Paying the Bills]
Yesterday, I talked about the tremendous year the solar industry had in 2010. While the S&P was up nearly 20%, some [solar and utility] companies saw gains as high as 80% and 120%.

And for the first time ever, the industry installed over 1 gigawatt of capacity.

[Charging record price rates for the power produced]

Solar has a lot of momentum going into 2011.

And that tailwind is being reinforced by the US government.

For the past few years, they have been giving the [solar utility] industry all the help they can in the form of tax credits, grants, and incentives. These totaled $2.5 billion last year. That was four times the 2009 amount.

[Yet not a penny for individuals or the poor! Yes, we are eligible for tax credits, but since only the upper middle class and the wealthy can afford the initial costs to put solar on their homes, almost nothing it being paid out.]

One example is the Treasury Grant Program (TGP). It lets the owner of a commercial solar project take a 30% cash grant instead of a tax credit.

[Individuals get only the tax credit option and even using the highest tax bracket, that equates to less than5% of the actual cost of a whole house system. The reality is that as an individual, you only get to deduct a part of the cost (not including installation costs that are included in commercial grants) and then you still only save at the percentage your tax bracket falls into. In rough terms, a $10,000 solar system plus $5,000 dollars of installation gets a commercial company $4,500 in grant money. That same system for an individual will get you only $2250 assuming a 50% deduction in a 30% tax bracket. Effectively, the poor that pay little, if any, taxes to start with, see no deduction at all.]

The TGP was set to expire at the end of last year.

But the US government wasn’t about to let all the momentum the solar [Utility] industry has built up slip away.

So they extended the TGP for another year.

The government [and me as well] is aware that this is about jobs too. Job growth for solar companies is forecast to be 26% over the next 12 months. That compares to 2% for the overall economy.

[But that job growth is for only one small segment of the economy. Just imagine the job growth if individuals had an extra $100 to $200 or more a month to spend because they didn't have the high (and rising fast) utility bills to pay. I'm guessing that that 26% for solar companies would pale in comparison to even a 10% jump in the economy as a whole. I have no doubt that it would be closer to 20% or more with the influx of consumer spending accross the board that would happen if individuals spent their utility money on goods and services instead of on power bills.]

And the job growth should continue. The industry is expected to add 24,000 new jobs this year and nearly 300,000 jobs in the next 5 years.

[But at what cost? How many other businesses will close because consumers are paying ever increasing amounts to the utility companies for what is esentially FREE Power?]

You can bet that the government will do everything it can to support an industry that can wean us off our foreign oil dependency and add jobs at the same time. [Not to mention pay lobbyists and goverment officials large sums of money for their support.]

[The rest of his article is on investing in solar companies... as if many of us still have the cash to invest in anything. You are most welcome to read it and if you do still have investments, I would encourage you to read and pay close attention as Mr. Hill is quite right in his assessment for 2011 and solar. Unless the people come together and let the government know that they are not going to stand for any more spending on businesses while the general public is left to keep footing the bill... and I know that that isn't going to happen this year... then solar power companies are going to be most profitable for the next few years.]

So 2011 will likely be another strong year for solar. The question then becomes: Where should you consider investing?

The largest photovoltaic manufacturer in the world is First Solar (FSLR), the blue line in the chart below. The company is headquartered right here in the US but does a significant amount of business globally.

Another option is JA Solar Holdings (JASO), the red line in the chart. They are located in China and sell their solar cells to larger manufacturers.

Finally, look at LDK Solar (LDK), the yellow line in the chart. Also located in China, LDK is more of a fully integrated solar company. They produce their own solar cells, develop solar projects, and sell materials to other solar companies.

Wherever you invest, keep a close eye on your positions. Subsidies and tariffs can change at any moment and have a major impact on a company’s business. Use a 25% trailing stop to protect profits and capital.

Tags: building_solar_house, home solar installation, home solar systems, solar government grants, solar power rebate, solar tax deductions