Congress is about to embark on yet another attempt to override a potential veto by President Bush and extend and enhance renewable energy and solar tax credits. But they still hope to pay for it by subtracting from the oil and gas industry's tax credits, which is putting these solar tax credits at risk.

Last week Rep. Charles Rangel (D-NY) and Democratic colleagues launched a bill that would extend the current 30% commercial investment solar tax credits for eight years, while the cap on residential solar tax credits would be increased to $4,000 from $2,000 and would be extended for six years.

It would also remove an existing limitation that prevents public utilities from claiming the commercial solar tax credits.

When solar tax credits were left out of the December energy bill, both House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid vowed to reintroduce them in early 2008.

Earlier this month, Congress once again left solar tax credits out of its broad economic stimulus package, leading House leaders to decide to attempt a stand-alone bill.

The legislation, which would result in approximately $18.0 billion in lost taxes over 10 years, is designed to tap additional revenue from the oil and gas industry to offset that, which President Bush opposes. The president's veto threat effectively killed the December attempt to fold the solar tax credits into the energy bill.

There are two different kinds of solar tax credits: commercial and residential. Commercial solar tax credits apply to businesses that put solar systems on their buildings or that build utility-size plants. Residential solar tax credits apply to private homes.

Despite the inclusion of the provision to pull credits away from the oil and gas industry, Monique Hanis of the Solar Energy Industries Association believes there is a chance there is support among congressional leadership to produce a veto-proof vote for solar tax credits.

"I'm hopeful because of the bipartisan support and the popularity among the American people for renewable energy," Hanis said.

Pacific Growth Equities analyst Michael Horowitz expressed frustration at the government's inability to pass a viable piece of legislation.

"This is something that's good for the economy, for national security and climate change," Horowitz says. "Instead it's been made into a political football."

Horowitz expects some form of solar tax credits to get passed before the end of the year, but stressed that a strategy of handing out extensions on a year-to-year basis stymies long-term planning.

"It would be nice to have an eight-year extension," Horowitz said, "but I highly doubt it; three to four years is probably doable."

Because so much of the solar business takes place outside the U.S., Horowitz contends that observers overplay the role that such solar tax credits will have on the industry.

"Much of the industry is offshore," Horowitz said. "The solar tax credits are not a deal-breaker for the stocks by any means."

For example, leading U.S. player SunPower (nasdaq: SPWR - news - people ) will be able to develop large-scale solar projects without solar tax credits, Horowitz notes--even though the passage of solar tax credits would open up the total available market.

Steve O'Rourke, an analyst at Deutsche Bank, said a lot of solar companies would like to see the U.S. market broadened because the potential is enormous.

"What we're trying to do is up markets rather than leaving them closed," O'Rourke said, "and by not including the ITC you're really killing potential growth."

The new bill comes at an interesting time in the high-flying solar industry. Solar stocks had been falling since the beginning of the year, as investors took significant profits on fears of an economic slowdown. (See: "Cloudy Debut For ReneSola") Yet First Solar (nasdaq: FSLR - news - people )'s very impressive fourth-quarter results brought renewed confidence in the sector. (See: "First Solar Flares")

"The demand trends for the industry are as robust as ever," said Adam Hinckley, an analyst at Oppenheimer.

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