The financial turmoil sweeping the U.S. financial markets has turned out to be a boon to the solar industry in the United States.  The $700 billion Wall Street bailout package passed by Congress last week includes an eight-year tax credit extension for individuals and companies that harness the sun’s rays to produce electricity.  The industry had been worried that the credits were not going to be given a new life after their December 31, 2008 expiration date.

This windfall comes at a time when the United States is showing a renewed interest in solar energy.  Although the country is only the fourth largest market after Germany, Japan and Spain, its 45 percent growth rate in solar panel installations tied to the grid is among the highest in the world.  The country also leads in the manufacturing of thin-film photovoltaic cells, with nearly half the world’s output.  Thin-film cells are 100 times thinner than wafers and generate energy more efficiently.

Most of the electricity produced from the sun’s energy in the United States takes place in California. The state hosts the largest solar power installation in the world.  Its Solar Energy Generating Systems (SEGS) produces 354 megawatts through nine power plants in parts of the Mojave Desert. It takes up 1,000 acres and each of the 400,000 solar mirrors can generate up to 400 degrees Celsius of heat. The Bureau of Land Management says 125 solar projects are being considered across the United States, with a combined electrical potential of 70,000 megawatts.

Big box stores are joining solar enthusiasts as well.  Best Buy, Safeway, Whole Foods, Staples, Target, Home Depot, Macy’s and Costco all announced they would install solar panels on the roof of their stores. Although fewer than 10 percent of the stores have been outfitted with solar panels, the chains promise to cover nearly all of them in the near future.

Wal-Mart has been particularly aggressive.  It put up a 624 kilowatt system on a store in Palm Desert, California in 2007.  It plans to do the same at 22 other locations in California and Hawaii, totaling as much as 20 megawatts.  If the company were to cover the roofs of all its Wal-Mart and Sam’s Club stores with solar panels, their acreage would be the size of Manhattan, according to the New York Times.

High energy costs are pushing retailers to think about energy from the sun, but the solar industry’s growth in the United States stems largely from generous tax incentives and rebates.  The Energy Policy Act of 2005 created the first residential tax credits for solar energy in almost 20 years.  California passed the country’s largest solar initiative in 2007 which promises 3,000 megawatts of new grid-connected electricity over the next decade.  That same year eight states expanded incentives to use solar energy as part of their renewable portfolio standard, according to the Solar Energy Industries Association.  Small businesses benefit from government support.  Not only do companies not worry about real upfront costs, but they may secure easy access to the grid through long-term agreements.

Incentives bring problems however.  Hundreds of small businesses have set up shop to install solar panels on residential or commercial property.  But were the tax incentives to disappear overnight, as could have happened had the Wall Street rescue plan not come along, thousands of jobs would vanish as well. There are up to 60,000 of these solar-related jobs in the United States, according to the Solar Energy Industries Association.  Changes may already be taking place in New Jersey where the Garden State’s rebate program had to be suspended after all the allotted money had been spent, according to the New York Times.

But solar energy is threatened by, of all people, environmentalists. Some are worried not just about the disruption to the natural habitat of animals and plants, but also about the depletion of scarce water supplies.   Solar panels, often located in sunny dry climates, need water to be washed free of sand and dust.

In the end, the high cost of energy will likely drive a growing number of companies to seek refuge in the solar industry.  They will not be going against the grain.

The issue of harnessing energy from the sun, once confined to environmental groups, is now at the forefront of American politics.  What companies need is reassurance from Republicans and Democrats that their support for solar power is not reliant on short-term electoral politics.  The tax credits included in the $700 billion dollar bailout will help the industry, but without a heartfelt willingness from politicians to support solar energy publicly for several years, the industry will have to moderate its enthusiasm.

For More Information: New York Times