Alternative Energy Gets a BIG Green Light… A MUST READ 4 SOLAR INVESTORS
- From: -=DirtBag© <Dirt@xxxxxxxxx>
- Date: Fri, 26 Sep 2008 10:20:43 -0700
The Investment U e-Letter: Issue #861
Friday, September 26, 2008
Alternative Energy Gets a BIG Green Light…
by David Fessler, Advisory Panelist
As Wall Street sits like a deer in headlights waiting for Congress to
resolve the credit crisis, investments in new alternative energy
projects have all but stopped.
Not having credit facilities to fund projects is one issue, but there was
an even bigger roadblock: The energy tax credits for the
manufacturing, production and use of alternative energy systems and
devices are due to expire at the end of 2008.
And up until a few days ago, it looked as though that might just
happen, which would be a giant step in the wrong direction with
regards to U.S. energy independence.
But nearly lost amongst all the "bailout" hubbub of Congressional
hearings this week was a key piece of legislation that passed by a 93-2
vote in the U.S. Senate on Tuesday.
I'm talking about H.R. 6049, entitled the "Renewable Energy and Job
Creation Act of 2008."
This historic bill rolls out roughly $18 billion in tax incentives and
credits specifically targeted at renewable energy projects and
property.
Major Incentives for Automakers… And Homeowners
Barry Cinnamon, CEO of Akeena Solar (NYSE: AKNS), had this to say
with regards to the Senate's action: "We know with certainty that the
extension of these credits sends out a green ripple effect: Solar
projects on hold can now move forward. America will create new
green-collar jobs – over 214,000 in California alone – and businesses
and homeowners can count on lower energy bills in a time of economic
hardship."
For months, Cinnamon, other CEOs and investors in solar, wind and
other renewable energy sectors have been sitting on the sidelines –
waiting for Congress to pass this legislation. And in addition to the
obvious job-creation effects, it's just what the country needs to begin
weaning itself off of foreign oil.
The bill's provisions, which extend existing credits and creates some
new ones, effectively offset as much as 30% of the cost of new
alternative energy projects, paving the way for green energy sources.
While the House of Representatives still has to approve this version of
the bill, once they do, the President has indicated he would quickly
sign it into law.
Here are some of the bill's highlights:
--Tax credits for wind generation facilities would be extended
through 2010.
--Tax credits for solar, geothermal, marine (tidal) and biomass,
municipal solid waste, trash combustion and hydro power
plants would last through 2011.
--Residential energy efficient property tax credits would run
through 2014, and the bill allows for up to $4,000 of solar
energy tax credits for homeowners who install such systems.
Here's one bound to get automakers excited: A new tax credit for the
production – and purchase – of plug-in electric vehicles.
It's been estimated that existing hybrid vehicles can be converted to
true plug-in hybrids for an additional $3,000 to $5,000, and this credit
might just be the catalyst that gets big automakers moving.
Felix Kramer, co-founder of CalCars.org – an organization which
promotes plug-in hybrid electric vehicles – thinks it will happen: "This
will have an enormous impact, and could conceivably entirely remove
the cost increment that carmakers say is the cause of their reluctance
to build plug-in vehicles."
And car buyers come out big, too. If you purchase a plug-in car or
truck, your credit could be as much as $7,500.
Other provisions of the bill provide tax credits for installing non-
hydrogen alternative fuel refueling stations. Biofuels, anyone?
One provision even allows you to deduct your bicycle commuting
expenses from your gross income. Being a cyclist, I'm particularly fond
of that one.
The previous legislation was primarily focused on residential and
manufacturing credits for solar. While they're still included, the new
bill goes a lot further, allowing utilities to take advantages of the
credits, too, and in the case of solar, extends them for up to eight
years.
Three Ways to Profit
This will likely jumpstart a wave of green power plant construction
projects and the bill includes $800 million in bonds to help fund them.
However, existing green-power producers win as well, as the bill
extends production tax credits for another year for wind and for two
years for solar, biomass and hydropower.
Thinking about installing solar panels on your home's roof? Now might
just be a good time to get started, as the bill extends solar investment
tax credits for homeowners to eight years, and removes the existing
$2,000 cap on the credits.
And if you live in the Midwest where the wind is nearly constant, you
might want to consider your own wind-driven power plant. The bill
includes a $4,000 credit for homeowners who install small wind
generators for power generation.
Of course, there's always the issue of how tax credits will be paid for.
It was initially envisioned as a tax on oil and gas producers, but that
might have killed the bill. Instead the IRS is delaying certain tax
deductions for these producers, which has a net effect of having them
pay for it anyway.
Clearly wind and solar companies will be big beneficiaries of this bill.
Last week, we talked about the Market Vectors Global Alternative
Energy ETF (NYSE:GEX) as a way to play the entire alternative
energy space.
However, if you want to focus specifically on wind power, there's the
First Trust ISE Global Wind Energy Index Fund (NYSE: FAN). For
the solar buffs, there's an ETF made up entirely of solar companies,
the Claymore/MAC Global Solar Index (NYSE: TAN).
All three of these ETFs should be big movers in the remainder of 2008
and 2009 as alternative energy companies begin to gear up production
as a result of this exciting legislation.
Good investing,
.
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