The larger and more complex concentrated solar projects often require longer lead times, casting uncertainty it automatically drops to 10 percent after Dec., 31, 2016.

Solar developers facing a 2016 deadline to complete projects in order to receive a key tax credit are beginning to cancel large projects, prompting the industry to launch an all-out push to extend the incentive.

At least two utility-scale thermal solar plants, including one planned by Oakland, Calif.-based BrightSource Energy Inc., have been mothballed amid uncertainty over whether companies would be able to qualify for the 30 percent investment tax credit (ITC), according to the Solar Energy Industries Association, a Washington-based trade group.

More cancellations are expected as the Dec. 31, 2016, deadline nears, said Derek Dorn, a partner at Davis & Harman LLP, who previously was Democratic staff director for the Senate Finance Subcommittee on Energy, Natural Resources and Infrastructure.

Nervous Developers ‘Pull Plug.’

“The closer we get to expiration of the credit, the more nervous developers will be [that] they won’t be able to make it in the window,” Dorn said in an interview. “Absent congressional action, we will see more solar developers pull the plug.”

Unlike traditional photovoltaic projects that use solar panels, concentrating solar or solar thermal projects use mirrors and other apparatus to focus sunlight on a receiver that captures the sun’s energy and converts it into heat that can run a turbine generator or engine, according to the Energy Department.

But the larger and more complex concentrating solar projects often require longer lead times, casting uncertainty over whether they will be able to qualify for the credit for both residential and commercial solar projects before it automatically drops to 10 percent after Dec., 31, 2016.

I think over the next year or so it is highly likely we will hear of a select number of larger-scale solar projects that will ultimately be canceled because they can’t bring a project online before the ITC drops,” Cory Honeyman, a solar analyst at GTM Research, told Bloomberg BNA.

Several other projects, such as the 150 megawatt Rice Solar Energy Project proposed by SolarReserve Inc., are considered in danger of not beginning operations before the 2016 deadline, Honeyman said. SolarReserve did not immediately respond to a request for comment.

Push for ‘Start Construction’ Modification.

In response, the solar industry is launching “an all out push” starting in 2015 to extend the investment tax credit by modifying it so that projects that begin construction, rather begin operation, by the 2016 deadline can qualify for the credit.

The wind energy industry received a similar modification for its production tax credit as part of a $12.2 billion extension enacted in the American Taxpayer Relief Act of 2012 that allowed projects that “start construction” by the end of 2013, rather than projects placed in service, to qualify for the credit, a change that effectively extended it well past its Dec. 31, 2013, sunset date.

A measure that would change the investment tax credit to a “begun construction” standard, advanced by Sens. Maria Cantwell (D-Wash.) and Michael Bennet (D-Colo.), could be addressed as part of comprehensive tax reform, Senate Finance Committee Chairman Ron Wyden (D-Ore.) has said.

A similar measure in the House, the Renewable Energy Parity Act of 2013 (H.R. 2502) by Rep. Mike Thompson (D-Calif.), has more than 100 co-sponsors.

Industry Girding for ‘Word War III.’

“This absolutely is going to be a long, hard, uphill battle,” Rhone Resch, the Solar Energy Industries Association’s president and chief executive officer, told a Las Vegas solar power conference, according to a transcript of his Oct. 20 remarks.

“Many Members of Congress, who are friends and allies of the Koch brothers and other anti-solar groups, want to end the ITC for good by either repealing it outright—or by letting it expire at the end of 2016,” Resch said. “I’ve got a simple response to that: Just forget about it. Walk away. Today, I’m going to make you a promise: As sure as World War I started in 1914, if the Koch brothers and their allies come after solar, 2014 will be the beginning of World War III.”

Analysts said the effort is likely to be difficult because unlike other tax credits that have expired, the ITC continues beyond 2016 at the 10 percent level, although Senate Majority Leader Harry Reid (D-Nev.) is said to support the change.

Uphill Battle Expected.

“I think it will be very difficult in the short term,” Amit Ronen, director of George Washington University’s Solar Institute and a former deputy chief of staff to Senate Finance Committee member Cantwell, told Bloomberg BNA.

The ITC was not addressed in an $84 billion tax extenders package (H.R. 3474) that was approved by the Senate Finance Committee in April, which may be brought to the Senate floor during a lame duck session of Congress.

“The solar industry is quickly finding itself in the same place that wind has grown accustomed and that is that as the clock ticks closer to expiration, there is a higher likelihood that a utility-scale project will not be able to access the robust federal incentives that enable the project economics to work,” Dorn said.

Additional Factors at Work.

In addition to the looming change in the ITC, other factors are at work, Ethan Zindler, head of policy analysis at Bloomberg New Energy Finance, told Bloomberg BNA.

“When you are talking about solar thermal technologies, they have faced some challenges due to the crashing price of photovoltaics, which has made it harder for them to compete,” Zindler said.

by Ari Natter