NEW YORK - The omission of renewed investment tax credits for solar energy in the wide-sweeping energy bill signed by President Bush late last month has put the future health of the U.S. solar industry in question.

The bill includes more stringent mandates for fuel economy and energy efficiency, but it doesn't extend the investment tax credit for companies specializing in the solar industry. That credit, which amounts to 30 percent of the value of qualified residential or commercial solar equipment, is set to revert to 10 percent at the end of 2008 unless it is extended.

Solar industry companies also lost out because the bill didn't include a mandate that would have required utilities to produce up to 15 percent of their electricity from renewable energy sources. More than half the states, most of them in the Northeast and on the West Coast, already have similar requirements.

A federal mandate could have bolstered the solar industry by encouraging utilities in regions such as the Southeast, where most states don't have renewable energy standards, to buy more energy from the solar industry.

Unless the investment tax credit is renewed before the end of the year, companies that produce solar power and related technologies in the U.S. are likely to scale back or scrap existing projects and seek more business overseas, analysts say.

"There is nothing favorable in this bill for the solar industry," said Michael Carboy, managing director and clean energy research analyst for Signal Hill Capital Group LLC, a Baltimore-based investment bank for small and midsize companies.

Because the solar industry investment tax credit will fall to 10 percent at the end of 2008 unless a new bill is passed, solar industry companies will likely rush to complete projects before the end of the year. Projects that are on shaky financial ground without the credit are likely to be abandoned, Carboy said.

"There's going to be a mad dash," he said. "At the margin, there are probably some projects that won't be pursued without the tax credit."

Sales of photovoltaic panels and other solar industry equipment may begin to drop off after the first quarter if the tax credit isn't renewed, said Rhone Resch, the president of the Solar Energy Industries Association, a Washington, D.C.-based industry group. And concentrating solar industry power projects, which use mirrors to focus the sun's power, require longer lead times and may go completely dormant without the credit, Resch said.

In September, SunPower Corp. (nasdaq: SPWR), a San Jose, Calif.-based manufacturer of solar cells, panels and systems, signed an agreement with Macy's Inc. (nyse: M) to install rooftop solar power systems on 28 stores in California. SunPower could have entered into an even wider-ranging agreement with Macy's if it weren't for the tax credit's looming expiration, said Julie Blunden, SunPower's vice president of public policy.

"Because the current tax credit only goes through the end of this year, some customers are only contracting for projects that can be completed by the end of the year," Blunden said.

If Congress doesn't renew the investment tax credit in 2008, some solar industry companies are likely to seek business opportunities overseas instead of in the United States. In Spain, for example, the government has targeted 12 percent of its energy to come from renewable sources by 2010, with 400 megawatts to come from the solar industry. China also has ambitious plans for solar energy, aiming to generate and consume about 300 megawatts from the solar industry by 2010.

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