Solar and fuel cell tax credit reprieve

The bipartisan Securing America's Energy Independence Act introduced in the U.S. Congress yesterday, if passed, will continue to extend 30% tax credits for solar photovoltaic and fuel cell systems for homeowners and businesses through 2015.

Yet while applauded in most quarters of the solar and fuel cell sectors, some wonder whether the government could and should do better.

For its lot, the fuel cell industry was happy.

"Long-term tax credits are an essential component of fuel cell commercialization. They help build confidence among early adopters, level the competitive playing field and stimulate cost reduction and product innovation," said Robert Rose, Executive Director of the U.S. Fuel Cell Council, the industry's trade association. "Credits will also accelerate fuel cell deployment, helping assure that the benefits of fuel cells are fully realized."

"Investment tax credits for non-passenger-vehicle fuel cells will stimulate the supplier market, lower production costs, foster innovation and provide experience to customers and potential customers," Rose added. "The economies of scale developed in these markets will make possible the technical improvements and cost reductions needed to succeed in the transportation sector."

The USFCC's current product list identifies nearly 50 fuel cell products available for commercial purchase. Many will benefit from the extension of the investment tax credit.

Tax credits for solar photovoltaic (PV) and fuel cell systems created through the Energy Policy Act of 2005 were initially set to expire at the end of 2007. In mid-December, Congress extended the Energy Policy Act for an additional year, until the end of 2008 (see U.S. Congress extends federal solar tax credits). The alternative energy industry had been expecting a longer term extension and was disappointed.

Today, analyst Jeff Osborne of CIBC World Markets published a research note predicting the new legislation would be positive for the fuel cell and solar industries because of the length of its commitment, yet noted it was "not as progressive as some of the European feed-in systems."

Solar companies in the U.S., however, seemed delighted, and said they weren't sure they needed a European-type system.

"I think it's terrific, and based on the track record we have here, it's exactly the kind of program that will work here in the U.S.," Barry Cinnamon, CEO of large American solar installer Akeena Solar, told the Cleantech Group.

"Feed-in tariffs work most effectively for large remote solar projects. They're typically commercial or utility customers. Here, residential and small businesses are voting with their wallets, saying we want to buy these kind of solar systems ourselves, and want some sort of tax rebate or offset. If you were to offer them a feed-in type subsidy over 10 years, they would ask 'well, who's going to help me offset the initial cost?'"

While the new legislation will extend the 30% tax credit for PV and fuel cell property through 2015, the credit on residential systems is capped at $2,000. No such cap applies to commercial systems. Also, businesses will be able to use a three-year accelerated depreciation schedule for eligible PV and fuel cell equipment.

The solar and fuel cell industries had been working together to support the extension.

The bipartisan bill was introduced by Congressman Mike McNulty (D-NY) and Congressman Dave Camp (R-MI). A companion bill is expected to be introduced in the Senate shortly.

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