Barron’s D.C. man makes case against continuing solar subsidies … whether he means to or not

Jim McTague‘s latest “D.C. Current” column in Barron’s appears to lament the fact that the solar industry might lose the crutch American taxpayers have provided it for a decade. Read McTague’s assessment closely, though, and you’ll find good reasons for Congress to allow current solar subsidies to — wait for it — sunset.

Currently, the business is the beneficiary of a 30% federal investment tax credit for solar installations in service on or before Dec. 31, 2016. This subsidy — a boon to shareholders in solar stocks in recent years — covers industrial, business, and residential customers. The credit is slated to drop to 10% in 2017, which has solar companies worrying that investment and financing could dry up as their financial projections look less rosy. The Solar Energy Industries Association would like Congress to at least tweak the law this year to apply the credit to projects that “commence” before the end of 2016. Large commercial projects generally require about three years to build. Unsure of a tax extension, venture backers and lenders also are leaving projects on the drawing board.

Ultimately, the industry would like to see the entire 30% investment tax credit extended to at least 2025. The credit is “the backbone of the industry,” says Rhone Resch, the association’s president and CEO.

Backbone, eh? So the industry can’t survive on its own?

There are other clouds hanging over the solar industry. When the investment tax credit was signed into law in 2005 — by President George W. Bush and a Republican-controlled Congress — solar was viewed as an important player in the nation’s drive for energy independence. The same bill included earmarks for clean coal, hydrogen, and hydraulic-fracturing research as well as support for hybrid cars and nuclear power. Energy independence again was a major concern in 2008, when Congress slipped a solar investment tax credit into the Emergency Economic Stabilization Act that year. Since then, however, our energy independence has been ensured by advances in fracking. And the solar industry in 2009 assured Congress that it would be robust enough by 2016 to get by with a 10% investment tax credit.

“THAT CLEARLY WAS OVERLY optimistic,” says Resch. He notes that the affordability of solar power was hurt recently when the U.S. hit panels manufactured in China with a stiff tariff because their low prices resulted from generous Chinese government support. The cheaper Chinese panels were used as components by solar companies like Elon Musk’s SolarCity (ticker: SCTY) to keep costs down. In essence, the industry was dependent on tax aid from the Chinese government on top of breaks from the federal government and a host of states. Those cheaper imports, however, hurt domestic solar-panel makers.

So this industry cannot survive without the support of not one, but two national governments, along with state-level subsidies?

The sun supplies enough energy to meet the daily electrical needs of every earthling. But taxpayers don’t have unlimited cash to supply the daily needs of the solar industry, and politicians don’t have unlimited patience for solar to deliver on its promises.

Let’s hope that’s true.