The latest issue of Bloomberg Businessweek, which focuses on the year ahead, signals that renewable energy companies might have to learn to live without taxpayer subsidies.
In 2016 the U.S. will learn if renewable energy can survive without government support. The most significant tax credit for solar power will expire at the end of 2016, and the biggest one for wind already has. These federal subsidies have provided wind and solar developers with as much as $24 billion from 2008 to 2014, according to Bloomberg New Energy Finance. That’s led to a 12-fold increase in installed capacity over the past decade, helping lower costs at least 10 percent each year.
Combined, wind and solar still generate less than 5 percent of electricity in the U.S. The subsidy cuts come as both industries face stiffer competition from ultracheap coal and natural gas. An NYSE Bloomberg global index of solar stocks, including those of big developers SunEdison and First Solar, has fallen about 35 percent since June. A comparable wind index is down 20 percent.
Solar developers are racing to finish projects before the end of 2016. More than 8.5 gigawatts of solar capacity will go online in 2015, followed by at least 11 gigawatts in 2016, BNEF says. Without the tax credit, which reimburses developers 30 percent of a project’s cost, BNEF expects solar installations in 2017 to drop about 70 percent.
Rhone Resch, head of the trade group Solar Energy Industries Association, says cutting tax incentives could cost the industry 100,000 jobs and erase $25 billion in economic activity. With subsidies, solar in most parts of the country remains more expensive than natural gas, coal, and nuclear. Without subsidies, solar is 35 percent to 40 percent more expensive, according to Bloomberg.
