Next year is shaping up as perhaps the most important one for solar energy since the federal budget for research in that area was growing rapidly in the mid-1970s.
While solar supporters are launching all-out renewal drives for the substantial tax credits which are due to expire at the end of next December, the Treasury Department, which has never been fond of the congressionally mandated benefits, has floated a tax reform plan that would eliminate those and other financing plans for selling renewable-energy equipment.
As widely reported, the tax reform proposal offered by Treasury Secretary Donald Regan would allow renewable-energy credits to expire and do away with both the standard 10 percent investment credit and the five-year accelerated cost recovery system.
Renewable-energy investments are usually based heavily on tax benefits.
The plan would also lower general tax rates, which makes tax shelters less valuable.
"I think it's going to have a very serious adverse effect on alternative energy and renewable-energy projects, if it were going to be enacted as proposed," said Martin Klepper, a third-party contract expert with Lane & Edson, a law firm here.
Klepper cautioned that some of the items in the Regan plan could easily be bargaining chips to enable the administration to get other items adopted.
Still, he said, the proposal will "significantly reduce, if not completely eliminate, the tax benefits to capital-intensive investment.
"And cogeneration and other alternative energy projects are very capital intensive. They are in a significant growth period requiring capital," he said.
Klepper predicted that the plan, if passed in its entirety, would leave "third-party ownership possible only where projects are economically feasible on a before-tax basis."
He emphasized that there still are some such projects around.
Offsetting this, he explained, there might be an overall effect over a couple of years of substantially lower interest rates, lower inflation and a lower cost of financing.
"The biggest problem however is this: It introduces uncertainty into the marketplace . . . . And that results in delays in installed projects, because people do not know what the effective date will be or even whether their benefits will still be there.
"My suggestion is to try to close deals as quickly as possible," Klepper said.
These types of tax changes usually are made retroactive to the date of introduction, he noted.
"If legislation is introduced in the next session, after mid January, provisions would be retroactive to that date."
Even with this attack on tax credits, solar supporters may be in a better position than ever before. Some of their best friends are in commanding positions in the Senate, which favored extension last session, while the House Ways and Means Committee refused even to bring the issue to a hearing.
Sen. Robert Dole (R-Kan.), last session's chairman of the Senate Finance Committee who is already showing himself to be an independent majority leader, has long supported tax benefits for renewable energy, particulary alcohol fuels.
Replacing Dole as chairman on the tax committee is Sen. Robert Packwood (R-Ore.), who was the chief author of the most generous credits extension bill this year. He already has come out against the Treasury's planned elimination of credits.
Meanwhile, to the surprise of many, Tina Hobson of the Solar Lobby said she was pleased when she saw the plan.
She said the citizen lobby has made a commitment to convince Congress that it is first in favor of eliminating all subsidies to energy industries.
"Such legislation is in the right direction because, among other things, removal of big subsidies to traditional forms of energy would enable better competition," she said. However, Hobson predicted that industry lobbyists "would be losing too much money" to allow the bill to stand as it is.
She was later joined in her sentiments by other national organizations representing environmental and consumer causes and supporting solar energy.
The other groups supporting the Regan plan are the Consumer Federation of America, Environmental Action, Environmental Defense Fund, Environmental Policy Institute and the National Audubon Society.
A very different opinion was expressed by Tom Gray of the Alexandria based trade group American Wind Energy Association.
"I guess I would say I'm not very happy with it. Renewable-energy industries have a lot of potential economic benefit to offer the country. So, we think it would be unfortunate if the economic incentives specific for us, and general ones that apply to us, were withdrawn."
Robert Hayden of the Renewable Energy Institute, also in Alexandria, views the Treasury's plan as an "unmitigated disaster."