Knocked Down But Not Out: America Could Be Global Solar Leader by 2014

A new report reveals that America's solar photovoltaic (PV) industry has gotten battered since the economy hit the skids last year.

But not to fret. A boost in federal incentives could trigger a rapid sector rebound and ultimately global solar leadership by 2014.

According to cleantech market researcher Pike Research, "The United States has become one of the more aggressive nations in promoting alternative energy technologies." But here's the problem:

"At the federal level tax credits and depreciation incentives are not currently enough to encourage sustainable demand growth."

Washington's latest boost in clean energy subsidies, in other words, is just not cutting it with investors, not in the face of this financial crisis.

"Financing for solar projects remains elusive," says the forecast, U.S. Solar Energy Demand Dynamics.

The report find that solar demand in the U.S. lags behind market leaders Spain and Germany in 2009 — despite fizzling subsidies and slow starts to the year in both those nations. In America, project cancellations and delays are also on the rise.

Case in point: New Jersey.

"The weak supply of tax equity combined with heightened credit requirements has led to numerous project cancellations and delays nationwide, with over 75 (megawatts), totaling $450 million, of idle projects in New Jersey alone," Pike analyst George Kotzias said.

That does not mean the PV sector is slouching toward oblivion. Quite the contrary.

Evidence suggests the tide may already be turning for U.S solar, as recently illustrated by Wells Fargo and U.S. Bancorp, "both of which have established tax equity funds for solar projects," say the authors.

This should help restore confidence in sagging solar markets. But let's be clear: It's not the banks that are keeping the prospect of renewables growth alive. It's the states. As federal climate change leadership has continued its long history of waxing and waning,

"states and municipalities have taken the lead in providing incentives through a variety of mechanisms ranging from upfront rebates and property tax credits to renewable energy credits and even European-style feed-in tariffs," the report says.

Notable leaders include California, New Jersey, Florida, Vermont and New York. Solar demand is even heating up in a few of these markets, namely in California.

State-level Renewable Portfolio Standards (RPS), which force electricity providers to obtain a minimum percentage of their power from clean sources, have been vital to continued clean energy development in these economic times. Currently, 29 states in America have them, and growing.

If Washington can catch up to the governors on such proven solar incentives, demand for the clean power would come back for the long term, says Pike Research. On this point the researchers are firm:

"Pike Research’s extensive interviews with both end-users and manufacturers conclude that for sustained growth in the U.S., incentives must be increased at the federal level."

If all this sounds familiar, it should. For years, the states have been the primary locus of policy action on global warming, enacting dozens of climate policies designed to touch all economic sectors and dovetail with a coming cap and trade scheme.

Under President Bush's eight-year presidency, governors stood alone among America's elected national leaders in their commitment to building a national clean energy economy. The hope was that states' work on fighting climate change, which also improves their economic bottom lines, would inform strong federal climate policy.

And it still may, based on the comments and policy priorities of President Obama's administration.