Federal Tax Credit is Expiring. What companies can stay in business?

[gwelty]

Let's assume it does not get renewed, which is very possible. That will cause a huge drop in revenue. Enough to bankrupt companies.

Do you see local installers staying in business? Do you see national installers going out of business?

[solarix]

Here's what I see happening when the Fed tax credit ends:

Leasing companies with lots of overhead will get clobbered - as their big advantage is transferring tax credits from homeowners that can't make use of it to investors that can.

Installers that have built large operations with lots of overhead based on the fat tax credits will not have enough margin to remain competitive.

Sooner or later - solar installation will become the province of local, small contractors (just like the rest of the construction trades) that can keep their pricing low enough to maintain a 6 or 7 year payback for their customers. Perhaps a nationwide franchise of solar installers will rise up (like roto-rooter or something) and take in all the independent local businesses.

Of course, the power industry is ripe for big changes to occur as renewables continue to eat into their profitability and no one can predict what that may cause.

[paul65k]

Here's what I see happening when the Fed tax credit ends:

Leasing companies with lots of overhead will get clobbered - as their big advantage is transferring tax credits from homeowners that can't make use of it to investors that can.

Installers that have built large operations with lots of overhead based on the fat tax credits will not have enough margin to remain competitive.

Sooner or later - solar installation will become the province of local, small contractors (just like the rest of the construction trades) that can keep their pricing low enough to maintain a 6 or 7 year payback for their customers. Perhaps a nationwide franchise of solar installers will rise up (like roto-rooter or something) and take in all the independent local businesses.

Of course, the power industry is ripe for big changes to occur as renewables continue to eat into their profitability and no one can predict what that may cause.

I think you're right on the money with most of these predictions.

I think the accelerator to all of these things will be when the state incentives (in those states with typically poor production) expire/go away and the real nail in the coffin will be when the utilities inevitably get to the point where they pay a homeowner no more for their energy production that they can get from wholesale suppliers as is already being proposed by many of the POCOs already.....only technology will change these dynamics when very cost affordable Off-Grid systems come to be reality which means a major breakthrough with a REVOLUTIONARY technology change and not just the evolutionary change that we have seen over the last 10 years....................only time will tell.

[emartin00]

I would disagree with Solarix. Yes, it will change the big names, but it's not going to clobber them. Their whole goal is to get as many systems up and running as possible, so they have a fixed income for the next 20 years. These are multi-million/billion dollar companies, they know how to plan for changes like this.

As far as the local companies, the ones who have a background in other markets (roofers, HVAC, or electrician) will not have a problem. They built a business before solar, and simply tapped into the extra cash flow. The installers who have only been around a few years and only do solar are the ones that will disappear. They will struggle to acquire new business against the other players who can differ their costs to other markets.

[solarz]

For Private companies, regardless to the size, they can shutdown anytime without any issues. So, I do not consider private companies as the national companies even they are big. The bigger a private company is, the more chance it will drop all its liability when there is less revenue stream coming in. The key for a private company is how is its overhead vs its future revenue stream. If you see the company has high overhead/a lot of marketing and you see its future revenue stream reduces significant, you would expect it will go badly and void all the liability later. That could explain small installers might stay longer since they can keep overhead low and survive with low revenue streams.

For public companies or big leasing companies, when revenue streams slow down or there is no grown in their business, the consolidation will happen. Multiple companies will be sold off or merged to one big company. This is very common in any industries. For example Computer Storage, multiple companies are heading to consolidate or to be sold as of now. Or Computer Hardware industry, consolidation happens a while ago.
When that happens, there is a chance liability will be dropped. However, public company has to put a side money for system warranty in their book (which is not been done by private company). So, those money can help to keep their liabilities for a while depending on the burn rate.

[lanb]

Equipment mfrs

What are the predictions on the equipment manufacturers themselves ? Both panels and inverter manufacturers ?

A few of them are already in distress and some are very young.

[J.P.M.]

What are the predictions on the equipment manufacturers themselves ? Both panels and inverter manufacturers ?

A few of them are already in distress and some are very young.

Follow the price of oil. Cheap energy (oil)is not good for expensive energy (solar). I bailed on my solar stocks about 8 months ago, and that was probably about 6 months too late.