Thursday, October 9, 2008

Mainstream Economy Falters, Solar Economy Shines

I've found a huge pocket of sunshine between the thunderheads dominating the financial news.

Congress actually did something sensible and greenlighted a raft of alternative energy incentives in its latest bailout, oh I'm sorry, RESCUE package last week. The remarkable irony is that this was a separate piece of legislation that some crafty senators attached to the "take or leave it" buffet of banking, mental health parity (a good thing, actually) and sloppy pork offerings passed under duress of market collapse on Friday.

Well, the markets didn't think it was enough and proceeded to wipe out another $1 trillion in equity. Now it's up to central bankers to pump money into the frozen credit markets. Bankers won't lend because they're afraid that borrowers won't pay them back. A lot of this is pure panic, but somebody has got to get the money flowing again. Or else payrolls will be logjammed, companies won't buy supplies and millions will get laid off. A recession is all but certain, the severity of which is open to a heap of speculation.

The bright spot is that the US Federal Reserve and Treasury, Bank of England, European Central Bank, Japanese Central Bank and People's Bank of China are almost on the same page on the core problem. They are flooding the banking system with money, which will help. It's also encouraging that China, Australia, Brazil, Western Europe and the Gulf States are flush. Russia has some reserves, although its stock market is shut down for the moment.

The credit freeze is akin to two boys at the mouth of a cave. They essentially know what's in the cave, but are frozen in space, saying to the other, "you go first, NO, you go first." And so it goes.

As we move toward the light, this may mark the end of the carbon era and the beginning of the solar age. It's about time. Some fairly decent tax incentives came out of Congress, which were obscured by the serious business of fixing the mortgage securities debacle, which will take years to resolve.

In the meantime, though, you can reap a break to put up a small windmill, install geothermal heating systems, buy energy-efficient and solar appliances. Here's a summary of the incentives, courtesy of the American Solar Energy Society (

Congress passes the most powerful solar legislation in history
Solar provisions will extend the solar investment tax credit
for eight years, removes the $2000 monetary cap

Homeowners battling against soaring energy prices and a struggling economy just gained a powerful new tool to help harness free, renewable energy from the sun, the wind and other sustainable resources.

The U.S. House and Senate just passed historic legislation that will massively increase the use of solar energy all across the America. Renewable energy provisions in H.R.1424 include an eight year extension of the 30% solar tax credit and removal of the monetary cap for residential solar electric installations. The President signed it into law on October 3.

The solar provisions in this bipartisan legislation will help position the U.S. as a global leader in the booming solar marketplace, generating thousands of green-collar jobs, promoting energy independence, and helping to tackle climate change.

"Renewable energy and energy efficiency are our economic drivers,” said Brad Collins, Executive Director of the nonprofit American Solar Energy Society. “I applaud members of Congress for coming together to extend the renewable energy tax credits that will strengthen the new energy economy and generate green jobs at a time when they’re needed most.”

Key provisions of this legislation will:

* Extend the investment tax credit for residential and commercial solar installations for eight years (it was previously set to expire at the end of 2008)

* End the $2,000 cap on the investment tax credit for residential solar electric installations placed into service after December 31, 2008.

* Allows filers of the alternative minimum tax to claim solar investment tax credits

* Allows public utilities to claim the solar investment tax credits

* Authorize $800 million in new clean renewable energy bonds and creates a new category of tax credit bonds called Qualified Energy Conservation Bonds to finance state and local initiatives to reduce carbon emissions

* Extends deductions for energy efficient commercial buildings

* Establishing a new tax credit for purchasers of plug-in electric-drive vehicles

* Extends research and development tax credits

What This Means to You

Given that energy prices (with the probable exception of crude/heating oil) will remain high in the short term, these write-offs will partially offset the cost of solar heating and electric units. There are systems available that provide both heat and hot water, so those are the best deals. They even work efficiently during the frigid winters of the Upper Midwest (I've seen this so I can verify their utility).

If you want to dabble in small wind turbines or geothermal, keep in mind the initial price tags are high and the paybacks much longer. Geothermal makes much more sense if you are building a new home on a site that permits additional excavation. As with any alternative energy appliance, see if your state offers a matching tax break. Most do. See

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