Lobbying Spike Helped Spur Solar Tax Credit Extension

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By Ari Natter

Feb. 18 — The surprise extension of a lucrative tax credit for the solar industry was powered by the influence of well-connected lobbyists such as former Republican Senate Majority Leader Trent Lott and a sharp spike in lobbying activity on the issue, records show.

The five-year extension of the solar investment tax credit, a legislative long-shot worth billions of dollars that was included in a $1.1 trillion omnibus funding bill enacted in December, came on the heels of a 29 percent increase in the number of organizations paid to lobby on the issue in the final quarter of 2015 as compared to the previous quarter, according to lobbying data made available by the Senate Office of Public Records.

(Click image to enlarge.)

Solar Lobbying chart

In all, lobbying reported in support of the solar tax credit more than doubled from 29 organizations in 2014 to 62 organizations in 2015, according to lobbying disclosure forms in the Senate Office of Public Records that included the term “solar investment tax credit” and legislation related to the credit's extension.

The 30 percent tax credit for solar developers had been scheduled to drop to 10 percent for commercial projects and expire completely for residential projects at the end of 2016. The credit's extension, estimated to cost $9.3 billion over 10 years, was part of a broader package that included $33 billion in energy tax credits. That package was part of a deal on the funding bill, which also included language lifting the long-standing ban on the export of domestic oil .

Solar Industry Leverage

“Once it became clear Republicans really wanted to lift the ban on oil exports, the question became how badly did they want it, and then we had a little bit of leverage,” Oscar T. Ramirez, who lobbied for the credit's extension for residential solar installer Solar City Corp. and others through the lobbying firm the Podesta Group, told Bloomberg BNA. Senate Minority Leader “Harry Reid [(D-Nev.)] had very vocally said he wanted the extension of the tax credits in there.”

In addition to Lott, others from the firm Squire Patton Boggs who lobbied on the issue for the Washington trade group Solar Energy Industries Association included David Schnittger, who had long served as deputy chief of staff to former House Speaker John Boehner (R-Ohio), and David Hoppe, who recently became chief of staff for newly elected House Speaker Paul Ryan (R-Wis.), according to lobbying data records from the third quarter of 2015.

Schnittger declined to comment on the record, and a Ryan spokeswoman declined to make Hoppe available for interview. A representative said Lott was not available for comment.

Lott “was instrumental in introducing us to many senior Republicans in the Senate, many on the Finance Committee, and really giving us a different introduction and face of the solar industry,” Rhone Resch, the president and chief executive officer of the Solar Energy Industries Association, told Bloomberg BNA.

‘Money Well Spent.'

The group, which represents companies such as solar installer Vivint Solar and SunPower Corp., used a $750,000 line of credit to finance its lobbying operation to have the tax credit extended, an effort that included grass roots lobbying and paying for a jobs analysis.

“It was money well spent really,” said Resch. “Everybody loves the sun. We just needed to really connect the dots so that these elected officials had a reason to support solar.”

It helped that Reid, the Senate minority leader, “was literally prepared to walk out of the room” during final negotiations over the package when the “only ones left in the room in addition to Reid were Senate Majority Leader Mitch McConnell (R-Ky.) and House Speaker Ryan,” said Resch.

“He took a very firm position if these last couple of provisions weren’t included,” Resch said. “There is a reason why the solar provision is on page 2,009 of a 2,010-page bill—because we were the last item. We were literally the last item until that bill became finalized.”

‘Staggering' Blank Check

The inclusion of the credit's extension led the stock prices for companies such as San Mateo, Calif.-based Solar City's stock price to surge by 34 percent after the deal was announced. SunEdison Inc., the world’s biggest renewable-energy developer, and solar provider Sunrun Inc., both of which reported lobbying for the tax credit, rose 25 percent and 23 percent respectively.

“Beyond any shadow of doubt, the U.S. solar market has just been given the most lucrative and government-backed seal of approval yet seen in the [photovoltaic] industry,” Finlay Colville, head of market intelligence at London-based Solar Media, said in a statement e-mailed to Bloomberg BNA. “At a time when the rest of the world is seeking to adjust to a world without incentives, the demise of the feed-in-tariff days, and auctions where solar has to compete with other forms of energy, it is almost staggering the level of funding in what appears to be a once-in-a-lifetime blank cheque offering to local installers and developers.”

As enacted, the solar tax credit is fully extended through 2019, before gradually ramping down starting in 2020 and expiring in 2022. In another victory for the solar industry, the bill also expands the credit to allow projects that have begun construction rather than only those that have completed construction to qualify for the credit.

Credit's Critics

The credit is not without its critics, such as the Alexandria, Va.-based Center for Individual Freedom, which said in a lobbying disclosure form that it spent funds to “oppose efforts to use legislation as a vehicle to extend handouts for green energy such as the wind production tax credit or the solar investment tax credit” while “urging both houses to end the federal crude oil export ban,” among other issues.

The Center for Individual Freedom, a non-profit constitutional and free market advocacy organization, has received millions of dollars in funding from Crossroads GPS, the conservative non-profit group started by Republican strategist Karl Rove, former deputy chief of staff to President George W. Bush, and the American Action Network, an advocacy group for what it describes as “center-right” policies that has received funding from groups that include the American Petroleum Institute and the American Natural Gas Alliance, according to the Center for Responsive Politics, a Washington-based non-profit that tracks political funding.

Jeffrey L. Mazzella, the Center for Individual Freedom's president, did not respond to an e-mail seeking comment.

Other groups that have raised questions about the solar investment tax credit include the Energy Initiative at the Massachusetts Institute of Technology, which questioned the efficiency of the credit in a May 2015 report.

“The use of tax credits instead of direct payments reduces the impact of the subsidy per dollar of cost to the government,” said the study, “The Future of Solar.” “The problem is that to take advantage of the tax credit, a firm must have income at least equal to the credit, or must find a partner that does, and incur the significant cost of tax equity financing to obtain some of the benefits. The need to ensure that the tax credit can be used adds a constraint to the project finance problem that reduces the per-dollar impact of this form of subsidy by half.”

Industry to Seek Another Extension?

A former lobbyist for the solar industry, who declined to speak on the record, was more blunt.

“I was generally shocked that it went through,” the former lobbyist said of the credit's extension. “It seems like a big windfall for the solar industry that isn’t clear is good economics. Do they really need it for five more years? I think it was not necessarily driven by the merits but by political support. I just think it's not good tax policy, and I’m a supporter of the solar industry. I don’t think its going to serve the purpose it's intended to serve.”

The Solar Energy Industries Association, in a fact sheet published shortly after the credit's extension, said the five additional years of the credit will lead to more than 72 gigawatts of photovoltaic installations through 2020—a 54 percent increase from expectations without the extension. In addition, the extension will “add” 220,000 solar jobs over the next five years and spur a $40 billion additional investment in the economy, the group said.

Asked if the solar industry plans to seek another extension of the credit when this one expires, Resch, the Solar Energy Industries Association's president, replied: “That's a good question. I don't think I can determine an answer at this point.”

To contact the reporter on this story: Ari Natter in Washington at anatter@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com

What is the Solar Investment Tax Credit?

The solar investment tax credit allows businesses and home owners who install solar energy systems to reduce the amount of income tax they must pay to the federal government in the amount equal to 30 percent of a solar project's total cost including equipment and labor.

While a homeowner who pays to have a solar system installed on his or her home can simply use the credit outright, commercial companies that install solar projects may not have enough tax liability — or sufficient taxable income — to take advantage of the credit.

In those cases, a solar project developer may engage in a “tax equity” transaction involving a partnership or lease between the developer and tax equity investor, typically a large bank or an insurance company.

Tax equity investors expect to achieve a commercial return on the deal, reducing the amount of the investment tax credit received by the project developer and lessening the impact the credit has in lowering the cost of the solar installation.

Sources: Solar Energy Industries Association, MIT Energy Initiative's “The Future of Solar Energy.”