Boosting Solar Manufacturing

Under current law, solar cell manufacturers based in the United States have strong incentives to build factories overseas, says Jon Sakoda, a partner at the venture capital firm NEA. But that could change, if a provision in the Senate version of the stimulus bill becomes law.

Sakoda spoke to me from Washington, DC, today, where he is drumming up support for the provision, which would set up a tax credit for manufacturing solar panels (and wind turbines and other renewable energy equipment) in the US. He says that five companies that he’s working with would start building factories in the U.S. this year. Without the credits, they’ll build in places such as Germany and the Philippines, which already have strong incentives in place.

The provision would fill a key gap–current legislation provides a tax credit to investors who are installing solar panels. “But if you ask them where they got the panels, they’d say Germany or Japan,” he says.

The manufacturing tax credit is not part of the House version of the stimulus bill however, and could be cut before the stimulus package becomes law.