SA-run SolarCity shares rocket 34% after US extends renewable tax credits

What makes market-driven economies so powerful is how they take their lead from the accumulation of millions of actions that automatically calculate results. The market often over-reacts in the short-term, offering opportunities for investors. But as economic growth records prove so comprehensively, in the long-term when countries employ the “invisible hand” of free enterprise, they enjoy vastly superior results to politically designed blueprints, no matter how well intentioned. We’re seeing this play out right now in the energy field where South African policymakers have panicked into acquiring increasingly antiquated and expensive nuclear technology in attempts to solve a well documented shortage of electricity. While the Zuma Administration eagerly pushes through plans to build a R100bn fleet of nuclear power plants, the alternatives keep getting cheaper and better. The ultimate irony, of course, is that it is South Africans – Elon Musk and his cousins Lyndon and Peter Rive – who are making much of the running in helping the US swing to renewables, their business SolarCity being comfortably the biggest installer of renewable electricity into US homes. Barack Obama’s government gave the SA-run company another boost overnight by extending tax credits that had been due to end next year. The value of SolarCity surged 34% as a result to a market cap of R59bn. Amazing what can happen when human ingenuity is incentivised by far-sighted lawmakers. – Alec Hogg

By Christopher Martin

(Bloomberg) — Solar companies climbed Wednesday after U.S. lawmakers agreed to extend a key federal tax credit.

In a deal announced late Tuesday, Congress approved an additional five years for the investment tax credit, which is scheduled to end at the end of 2016. It also provided a five- year retroactive extension of the production tax credit, which benefits wind-power developers and expired at the end of 2014.

Lyndon Rive, co-founder and chief executive officer of SolarCity Corp., speaks during a Bloomberg West Television interview. SolarCity offers solar power energy services providing design, financing, installation, monitoring and every efficiency services serving homeowners, businesses, schools, non-profits and government organizations in the United States. Photographer: David Paul Morris/Bloomberg
Lyndon Rive, co-founder and chief executive officer of SolarCity Corp., speaks during a Bloomberg West Television interview. SolarCity offers solar power energy services providing design, financing, installation, monitoring and every efficiency services serving homeowners, businesses, schools, non-profits and government organizations in the United States. Photographer: David Paul Morris/Bloomberg

Extending the ITC has been one of the solar industry’s top lobbying goals this year and uncertainty over its future has been a drag on development. Solar companies got an additional boost from California, where regulators proposed upholding policies that promote the use of rooftop panels, erasing another big question mark.

“The holidays have come early for the solar sector,” Jeffrey Osborne, an analyst at Cowen & Co., said in a research note Wednesday. Both the tax-credit extension and California’s proposed decision will help attract new investment and carry the industry until solar can compete without subsidies, he said. “The two issues have been an overhang on the space for several quarters.”

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SolarCity Corp., the biggest rooftop installer, surged 34 percent at the close in New York, the most in three years. SunEdison Inc., the largest renewable-energy developer, climbed 25 percent and panelmaker SunPower Corp. increased 14 percent. They were the top movers on the Bloomberg Intelligence Global Large Solar Energy index of 20 companies, which climbed 7.4 percent, the most since January 2014.

Budget Deal

In Washington, Congress agreed to let the ITC run through the end of 2021 as part of a broader budget deal. The credit will apply to projects that begin construction in that period instead of the current policy that applies to power plants that go into service before the deadline. It currently pays 30 percent of costs, and will gradually decrease.

The PTC used primarily by the wind industry pays 2.3 cents per kilowatt-hour of electricity generated. It will be gradually decreased over the next four years and phased out completely in 2020.

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In California, the biggest solar market, regulatory staff rejected Tuesday requests by utilities to increase fees and cut payments for rooftop solar customers. The proposed ruling is seen as a bellwether for how the rest of the country will deal with the rapid emergence of power generated by customers.

‘Strong Signal’

“Combined with the historic Paris climate agreement, long- term certainty for the ITC sends a strong signal to the marketplace that investment in clean energy is the right way to drive continued economic growth and job creation,” SolarCity CEO Lyndon Rive said in an e-mailed statement.

The tax credit extension will spur more than $125 billion in new investments for the U.S. economy, said Rhone Resch, chief executive officer of Washington-based Solar Energy Industry Association.

“Members in both Houses have reestablished America as the global leader in clean energy, which will boost our economy and create thousands of jobs across America,” Resch said in an e- mailed statement.

Read also: Pretoria boys making good in US – Elon Musk’s cousins leading solar charge

The solar supply chain is gaining from anticipated development. Enphase Energy Inc., a supplier of inverters used to build solar systems, surged 39 percent, the most since its March 2012 initial public offering. Competitor SolarEdge Technologies Inc. climbed 17 percent.

Shares of wind-power companies also responded positively to the news. Vestas Wind Systems A/S, the world’s biggest turbine maker, rose 4.3 percent to a seven-year high. Broadwind Energy Inc., a U.S. supplier of steel towers for turbines, climbed 4.3 percent.

“This is much better than expected,” Gregory Jenner, a Washington-based partner at the law firm Stoel Rives LLP. “It’s huge for the wind industry because they take longer to develop and build than solar and they’ve got a five-year glide path.”