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After Energy Subsidies End, Can Wind And Solar Thrive?

By Ellen R. Wald, Ph.D.Stock MarketsNov 10, 2015 05:32AM ET
www.investing.com/analysis/can-renewables-take-their-first-steps-270833
After Energy Subsidies End, Can Wind And Solar Thrive?
By Ellen R. Wald, Ph.D.   |  Nov 10, 2015 05:32AM ET
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In 2016, the United States is going to learn whether renewable energy can stand on its own two feet. Barring any last minute legislative or executive action from Washington, the most significant wind power tax credit recently expired and important tax credits for solar power are about to expire.

Will solar and wind energy companies be able to make it without government subsidies? It seems unlikely, so we should be prepared for solar and wind companies to take a hit.

Between 2008 and 2014, subsidies from the Federal Government provided wind and solar energy companies with about $24 billion. Without these subsidies, it is estimated that wind and solar power would be 35% to 40% more expensive. The solar tax credit that is about to expire actually reimbursed companies for 30% of the costs of building solar installations. Two years ago, when the wind subsidy expired, wind power construction dropped by 90%! The tax credit was then retroactively extended for another year in order to help companies complete projects in progress.

Some energy companies that are heavily invested in wind and solar are taking steps to shield themselves from unprofitable “clean energy” investments. NRG Energy (N:NRG), despite its CEO’s affinity for all things “green” (he owns four electric cars), is a prime example. The company recently announced plans to spin off its renewable energy investments into a separate business in order to protect NRG’s core share price.

The U.S. is not alone in trying to wean wind and solar off of government milk – Germany, Spain, the Czech Republic, and the U.K. are all cutting government funding for these projects.

Some solar companies, like SunEdison (N:SUNE), are moving on from the U.S. and Europe, and are now looking for new markets in India and China. Just recently, the company entered into a relationship with an Indian conglomerate in order to enter the Indian energy market. Just a few days ago, SunEdison won a bid to develop a 500 MW solar project in Andhra Pradesh by offering the lowest tariffs for its solar energy – about 7 cents per kWh.

While the bid certainly pleased the Indian energy minister, Indian investors are wary. Tariffs this low are unlikely to bring in returns, and, are probably just an attempt to capture market share in India.

After Energy Subsidies End, Can Wind And Solar Thrive?
 

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After Energy Subsidies End, Can Wind And Solar Thrive?

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