Solar Warns Fossil Price Collapse Threatens Renewables

Amid a backdrop of emerging green energy technologies and a show of international political interest at the Governors’ Global Climate Change Summit November 18, a solar energy executive delivered sobering news: Economic problems and plunging fossil fuel prices are undermining the transition to green power in the U.S.--at what could otherwise be its triumphant moment. Capital is the key cost for renewable energy, said Mike Ahearn, First Solar chief executive officer. It is getting more expensive and harder to come by for renewable projects. While the solar executive outlined recent financial hits to the industry, governors at the conference focused on the upside for renewable energy. “There is an incredible opportunity here to get our nation’s economy back on track,” said Kansas Governor Kathleen Sebelius. However, renewable energy projects are expensive and require “front-loaded” investment, noted David Cash, Massachusetts assistant secretary for energy and environmental affairs. Without money, they simply can’t be built, and right now money is becoming more of a problem. First Solar’s Ahern explained the international and U.S. economics of solar power. First Solar has been a fast-growing thin film solar producer based in Arizona with manufacturing operations in Ohio, Germany, and Malaysia. It has made major inroads in Europe under several nations’ feed-in tariffs. (These provide a fixed, long-term price for solar, wind and other renewable resources.) It remains hopeful about developments in the U.S., such as California’s million solar roofs program. European feed-in tariffs have helped renewable energy companies successfully finance projects and achieve economies of scale. Those two vectors have driven the price of solar and wind power down, according to Ahearn. U.S. tax incentives, while helpful, have had less “traction.” Now, just after Congress renewed the solar tax credit, disappearing profit margins are reducing the amount companies pay in taxes, which is undercutting the value of the incentives, observed Ahearn. At the same time, collapsing fossil fuel costs are making it more difficult for renewable power developers to compete in the market because suddenly fossil fuels are a cheaper alternative to renewable energy investments. This combination--coupled with increasingly tight capital markets--is making it more difficult for renewable energy companies to obtain financing, according to Ahearn The only solution, he said, is for government to send a “price signal” to the market, namely a carbon or energy tax that permanently increases the price of fossil fuels to create a more stable investment climate for renewable energy. Renewable energy companies also need “cash investment,” according to Ahearn. The solar industry executive’s warning came just days after renewable energy leaders in Washington asked the federal government for a $30 billion cash injection in the coming year. They want Congress to okay the money as a front-loaded disbursement from President-elect Barack Obama’s proposed ten-year, $150 billion clean energy fund (Circuit, Nov. 14, 2008).

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Solar Warns Fossil Price Collapse Threatens Renewables

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