As part of the American Recovery and Reinvestment Tax Act of 2009, the U.S. Treasury created Program 1603, which gave payments, instead of investment tax credits, to income-generating clean energy projects.
As a result of the program, $26 billion was funneled to nearly 110,000 clean energy projects.
While our current economic situation doesn’t mirror what the country was facing in 2008, there are those who believe that a similar program could be used as a catalyst to spark markedly high levels of solar development, when society and working conditions return to “normal.”
Among those with this belief is Jim Spano, co-founder of RadiantREIT, a solar financing firm that brands itself as financing solar like real estate.
Solar industry in a unique position to rebound quickly
“I think the lesson learned from the first downturn is that when public policy takes a coordinated interest against climate change, that policy will come up with alternatives to ensure that renewable projects continue to get developed and constructed.”
The rising likelihood that tax equity financing for solar will begin to evaporate has given Spano the belief that another financing model will come to the forefront – maybe for good.
“I think we’re going to see a lot more debt coming into the market, which reduces the need for equity and makes projects more economically viable. A lot of lenders are going to see significant growth and a lot of equity players in the market are going to be converting to debt positions, as they recognize that the risk-deviated returns will be greater on the debt side.”
Regardless of the financial tool used to make the upfront cost of developing a project manageable, Spano thinks that the solar industry is in a unique position to rebound more quickly and with less long-lasting effect than other industries.
An enhancement to the renewable industry
“Americans are anxious to get back to work. You’re going to see a quick turnaround, a lot of capital looking to be deployed and the pent-up capital demand in the renewable industry is what’s going to drive that quick rebound into a robust industry.”
If aid comes from the federal government, Spano believes new solar development will come nationwide, as states look to decrease unemployment with the jobs that renewable projects create. If the funding comes from the state level, this would skew renewable development towards the states that have already instituted high renewable energy standards, as they look to achieve the goals and mandates that they set.
“Not all states have adopted a 100% renewable goal. Common sense dictates that if a state passes a law calling for 100% renewables and the economics don’t support [development], even with the investment tax credit, the states are going to have to step in with some sort of incentive to achieve their goals…You can’t continue to have a law requiring 100% renewables if no renewables are being built.”
“I think that Covid-19 is going to be a significant enhancement to the renewable industry, because I think that we’re going to be the industry that provides the jobs and meets public policy goals.”