Solar Energy Industry Faces Eclipse : End of Consumer Tax Credits Signals a Dark Future

When congressional inaction caused the sun to set on solar energy tax credits on Dec. 31, the solar energy industry’s once-bright future turned cold and dark.

Without the tax credits that shelter up to half of the cost of installing a solar energy system, the $1 billion industry will shrivel by at least 60%, according to Terry Buffum, a Mountain View, Calif., solar energy systems company owner who serves as president of the Solar Energy Industries Assn.

“I’ve laid off about 25% of my small (17 employees) company, and if the credits aren’t restored by March, I’ll lay off another 25%,” Buffum said last week during the association’s annual meeting in San Diego.

The industry has been bothered by dark clouds hovering over other areas as well:

- A shady installer effectively killed the residential solar industry in Houston last year by selling thousands of non-functioning systems to consumers. The Texas attorney general’s office responded to that fiasco by issuing a report outlining legitimate business practices for the solar industry.

- The Reagan Administration is expected to cancel funding for the Solar Bank, which was created during President Jimmy Carter’s administration to make solar energy installations feasible for low-income homeowners.

- Although it is not likely to be dismantled, the mostly federally funded Solar Energy Research Institute in Colorado faces budget cuts which could lead to staff or research cutbacks.

Concerned about the backlash generated by solar system manufacturers and installers that have gone out of business, state chapters of the Solar Energy Industries Assn. have been pressing members to help consumers with “orphan” systems. Manufacturers in Hawaii, California and other states have created toll-free telephone hot lines to answer questions and provide direction for disgruntled owners.

However, Congress’ failure to extend the solar tax credits has prompted the industry’s darkest hour.

During a morning session last week in San Diego, industry members donated $56,000 to an intense lobbying effort to convince Congress to extend the credits through the end of August.

“That would give us a temporary extension until the House and Senate can agree on a tax law,” said David Gorin, executive vice president of the Solar Energy Industries Assn., who added that the House Ways and Means Committee has included solar credits in a series of hearings that begins on Wednesday.

Companies that manufacture, sell and install solar systems “have basically reconfirmed that not fighting for the continuation of the federal tax credit is the equivalent of throwing in the towel,” Gorin said.

Existing federal tax programs give “an unfair competitive advantage to the nuclear, oil and natural gas industries,” said Gorin, who suggested that the solar credits can be restored “in a way that is in keeping with the current tax program as suggested by Gramm-Rudman.”

Last year, the Senate failed to adopt a House-approved extension that would have phased out credits over a three-year period.

However, the solar industry remains confident that Congress will reinstate the credits. “We fully believe that this can be resolved by March 15,” said Gorin.

But even if the tax credits are reinstated, the solar industry faces growing pains.

Manufacturers and installers have been forced to spend heavily on advertising and marketing campaigns designed to convince consumers that solar energy makes economic sense.

“A heavy portion of the cost of a retail system is in marketing,” Gorin acknowledged. “It’s almost as much as the manufacturing costs.”

The industry has struggled to create standards and certification procedures which would help weed out unscrupulous dealers.

The industry also has suffered from tumbling oil and natural gas prices.

“Right now, the public’s awareness of energy issues and problems has diminished to practically nothing at all,” said Bill Kratz, who owns a San Diego solar energy company. “The temporary glut of oil on the market has left the general feeling that (consumers) no longer have any permanent energy problem.”