Greentech Media

Like any business, the solar business hates uncertainty. And right now, there's plenty of it.

That's because government subsidies in Spain and the United States hang in limbo, leaving solar companies with a foggy picture of what 2009 will look like, according to a research note from Thomas Weisel Partners analyst Jeff Osborne this month.

The Spanish incentive is one of the most alluring in the world today, offering at least 42 euro cents per kilowatt-hour of solar energy fed into the grid. But the program is set to expire Sept. 30 and a new policy hasn't yet been established, meaning projects that aren't completed by then aren't guaranteed a set price.

With decisions still hanging in the balance, industry insiders have been speculating about the replacement incentive for months.

Spain's Ministry of Industry, Tourism and Trade last year proposed lowering the feed-in tariff to 31 euro cents per kilowatt-hour. A leaked royal decree in April proposed a subsidy of 35 euro cents per kilowatt-hour, according to a research note from Piper Jaffray analyst Jesse Pichel.

The concern about the Spanish tariff is heated enough that when Spanish Prime Minister Jose Luís Rodríguez Zapatero called public-sector support of renewable energy "an important investment in the future" in an interview with the Financial Times earlier this month, it prompted Pichel to write another note.

"We believe this interview should give investors some comfort that Spain will remain a significant growth market for solar longer term, although 2009 may be a modestly down year," he wrote. "Spain remains an overhang until the new decree is official in July or September."

In the United States, a bill that would have extended renewable-energy incentives for several years failed to pass last week and again this week, throwing a wrench into projects that won't be completed before the year ends. The industry has been struggling for months to extend tax the tax credits, but hasn't been able to get a bill past both houses of Congress (see Senate Blocks Renewable Incentives Bill, Policy Roundup: U.S. Senate Passes Incentives, Solar Roundup: Another Tax-Credit Proposal, Solar Sharpens Weapons for Incentive Battle, Solar Industry's Five-Step Plan, Renewable Tax Incentive Still At Risk, Senate Rejects Green Incentives to Pass Energy Bill and Senate Sends Energy Bill Back to Beginning).

While many companies still believe a one-year extension will be passed before the credits expire at the end of the year, Thomas Weisel Partners doesn't have high hopes that will happen on time to prevent a gap, according to a research note.

"It perplexes us as to why the investor community has continually hoped for the passage of this bill over the last 12 months; however, given that we are in an election year we don't have high hopes for a controversial bill taxing "Big Oil" to fund renewables passing," Osborne wrote, adding that the firm expects a bill setting up incentives for multiple years to pass in the fall of 2009.