Solar Companies Surge as U.S. Tax Credit Brings Early Holiday

(Bloomberg) — Solar companies climbed Wednesday after U.S.
lawmakers agreed to extend a key federal tax credit.

In a deal announced late Tuesday, Congress approved an
additional five years for the investment tax credit, which is
scheduled to end at the end of 2016. It also provided a five-year retroactive extension of the production tax credit, which
benefits wind-power developers and expired at the end of 2014.

Extending the ITC has been one of the solar industry’s top
lobbying goals this year and uncertainty over its future has
been a drag on development. Solar companies got an additional
boost from California, where regulators proposed upholding
policies that promote the use of rooftop panels, erasing another
big question mark.

“The holidays have come early for the solar sector,”
Jeffrey Osborne, an analyst at Cowen & Co., said in a research
note Wednesday. Both the tax-credit extension and California’s
proposed decision will help attract new investment and carry the
industry until solar can compete without subsidies, he said.
“The two issues have been an overhang on the space for several
quarters.”

SolarCity Corp., the biggest rooftop installer, surged 34
percent at the close in New York, the most in three years.
SunEdison Inc., the largest renewable-energy developer, climbed
25 percent and panelmaker SunPower Corp. increased 14 percent.
They were the top movers on the Bloomberg Intelligence Global
Large Solar Energy index of 20 companies, which climbed 7.4
percent, the most since January 2014.

Budget Deal

In Washington, Congress agreed to let the ITC run through
the end of 2021 as part of a broader budget deal. The credit
will apply to projects that begin construction in that period
instead of the current policy that applies to power plants that
go into service before the deadline. It currently pays 30
percent of costs, and will gradually decrease.

The PTC used primarily by the wind industry pays 2.3 cents
per kilowatt-hour of electricity generated. It will be gradually
decreased over the next four years and phased out completely in
2020.

In California, the biggest solar market, regulatory staff
rejected Tuesday requests by utilities to increase fees and cut
payments for rooftop solar customers. The proposed ruling is
seen as a bellwether for how the rest of the country will deal
with the rapid emergence of power generated by customers.

‘Strong Signal’

“Combined with the historic Paris climate agreement, long-term certainty for the ITC sends a strong signal to the
marketplace that investment in clean energy is the right way to
drive continued economic growth and job creation,” SolarCity CEO
Lyndon Rive said in an e-mailed statement.

The tax credit extension will spur more than $125 billion
in new investments for the U.S. economy, said Rhone Resch, chief
executive officer of Washington-based Solar Energy Industry
Association.

“Members in both Houses have reestablished America as the
global leader in clean energy, which will boost our economy and
create thousands of jobs across America,” Resch said in an e-mailed statement.

The solar supply chain is gaining from anticipated
development. Enphase Energy Inc., a supplier of inverters used
to build solar systems, surged 39 percent, the most since its
March 2012 initial public offering. Competitor SolarEdge
Technologies Inc. climbed 17 percent.

Shares of wind-power companies also responded positively to
the news. Vestas Wind Systems A/S, the world’s biggest turbine
maker, rose 4.3 percent to a seven-year high. Broadwind Energy
Inc., a U.S. supplier of steel towers for turbines, climbed 4.3
percent.

“This is much better than expected,” Gregory Jenner, a
Washington-based partner at the law firm Stoel Rives LLP. “It’s
huge for the wind industry because they take longer to develop
and build than solar and they’ve got a five-year glide path.”

To contact the reporter on this story:
Christopher Martin in New York at cmartin11@bloomberg.net

To contact the editors responsible for this story:
Lynn Doan at ldoan6@bloomberg.net;
Reed Landberg at landberg@bloomberg.net
Will Wade, Stephen Cunningham

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