As Solar Pushes for U.S. Tax Break, One CEO Says Don’t Bother

(Bloomberg) — Congress is debating whether to renew an
investment tax credit that for nine years has helped put solar
panels on rooftops across the country.

But John Berger, the chief executive of Houston-based
residential solar-power installer Sunnova Energy Corp., is on a
one-man mission to get them to drop the idea.

In letters to tax writers and meetings with lawmakers
Thursday and Friday on Capitol Hill, Berger argued that the
investment tax credit has served its purpose in jump-starting
the solar industry and cycles of expiration and extension would
drive away investment. He said Congress should let sun set on
the tax credit that’s scheduled to be reduced next year to 10
percent for commercial projects and nothing for residential
customers from the current rate of 30 percent of the value of a
solar system.

“This was supposed to push the industry off the dock; it
did that,” Berger said in an interview Friday. “We’ve been able
to drive down the cost far faster and far more than anyone
thought. Do we really need more taxpayer dollars? No.”

Berger’s view sets him apart from the majority of solar
developers, installers and manufacturers in the U.S. who insist
that continuing the credit is essential to sustain growth in the
sector, especially as it competes against low-cost natural gas.

100,000 Jobs

If the tax credit isn’t kept at current levels beyond next
December, installed solar capacity is expected to fall by nearly
8 gigawatts from 2016 to 2017, and 100,000 U.S. jobs tied to the
sector may be lost, a Bloomberg New Energy Finance analysis
completed for the Solar Energy Industries Association in
September found.

Sunnova “may be doing solar installations, but by no means
do they represent what’s actually happening in the solar
industry or what the overall industry needs with respect to the
tax code,” said Rhone Resch, president of the Solar Energy
Industries Association. “This is a good policy. It works. It’s
deploying solar.”

Fourteen chief executives from San Francisco-based Clean
Power Finance, Salt Lake City-based sPower, financing firm Sol
Systems and other companies in the trade group fanned across
Capitol Hill this week to amplify that message, as lawmakers
consider changes to the investment tax credit as part of a
broader “extenders” package.

Credit Extension

The solar trade group backs legislation from Representative
Mike Thompson, a Democrat from California, that would extend the
tax credit for residential and commercial deployments by five
years and broaden it so projects could qualify for the credit as
long as construction begins before the expiration date. Under
the current approach, solar projects must be in service by
December 2016 to take advantage of the credit.

“Across the board, we’re finding that the industry still
needs the investment tax credit in place,” Resch said.

Complicating the issue is resistance from fiscal
conservatives, including groups such as Citizens Against
Government Waste and the American Energy Alliance, who argue
renewable tax credits are subsidies that unfairly prop up the
power sources. “The U.S. government should not be anointing
certain niche industries over others,” CAGW president Tom Schatz
said. “It is time for the solar energy industry to pass muster
in the marketplace without subsidies.”

Other Views

Berger and privately held Sunnova are breaking from the
pack, but other solar companies — especially those that are
publicly traded — have made clear to investors that they will
be fine if the tax credit declines. For instance, SunPower Corp.
Chief Executive Officer Tom Werner told analysts in October that
improvements in efficiency can offset a reduction in the tax
credit. Lyndon Rive, the chief executive officer of SolarCity
Corp. told investors in October the residential installer will
have a positive cash flow by the end of 2016 even if the tax
credit drops as planned. 

Berger sees the investment tax credit as blunting
competitive pressure to pare costs and blocking the industry
from tapping into billions of dollars of capital from commercial
banks and oil investors.

He doesn’t want solar to fall in the same trap as wind
developers that are perennially fighting to prolong the life of
a production tax credit –- a vicious cycle of renewal and
expiration that turns off investors craving certainty. Congress
habitually waits until the last minute to extend a host of
expiring tax credits known as “extenders” because of the ritual.

Berger’s message to Congress regarding extending the tax
credit: “Don’t do anything.”

“By doing something, you create uncertainty. That’s been
the affliction on the wind industry, and we don’t want that.”

To contact the reporter on this story:
Jennifer A. Dlouhy in Washington at jdlouhy1@bloomberg.net

To contact the editors responsible for this story:
Jon Morgan at jmorgan97@bloomberg.net
Elizabeth Wasserman

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