At Run on Sun we don’t take partisan stances on politics. We believe everyone, regardless of politics, benefits from harnessing the unlimited resource of sun-powered PV systems. However, the recent election has raised questions about the future of federally-backed support for solar - specifically the federal solar investment tax credit (ITC). The short answer is, we are optimistic the current plan for the ITC to continue for three years at 30% then gradually sunset after five will be unaffected. Here’s why:
The fact is, the ITC is federal law and laws are not easily changed. Even if it did somehow manage to be changed before the 5-year planned sunset, we are confident our state will step up to make sure adequate support continues to make solar an economically viable option for the public. Never fear! Solar is here to stay.
(Thank you to CALSEIA and Executive Director Bernadette del Chiaro for the inspiration for this blog and for their invaluable efforts to advocate on behalf of the solar industry.)
Today is a great day for solar! The uncertainty around the ITC (federal solar tax credit) is finally over and we can all rest assured that the solar industry will not fall off a cliff come December 31, 2016!
You may have heard the big news about the bipartisan passing of the year-end budget deal to effectively not shut down the government for one more year. But you may have missed the news that they also passed a 1.1 trillion dollar omnibus spending bill including the extension of many tax credits. Guess which exciting tax credit was included?? That’s right, the solar ITC and other renewable energy tax credits were included in HR 2029. The spending bill is the result of a deal between party leaders. The unfortunate cost of the five-year extension (and other Democratic priorities) is the lifting of the 40-year-old oil export ban and a series of permanent tax cuts.
This morning HR 2029 passed the US House of Representatives (316-113) and the US Senate (65-33). This means that the Omnibus funding bill goes to the President for his final signature, which he has already agreed to do. This is a great day for the solar industry, living-wage American jobs, the growth of clean power and all the policy advocates out there fighting to extend the ITC.
Here are the details regarding the new extension of the solar tax credit:
“We commend members of Congress in both parties for taking this bold step and we look forward to delivering on the promise that this policy now offers all Americans. Thanks to the ITC, solar energy will add 220,000 new jobs by 2020, and with this extension, the solar industry can achieve its pledge of employing 50,000 veterans. Clean solar energy will cut emissions by 100 million metric tons and replace dozens of dirty power plants.
Importantly, in the follow up to the Paris accord, this establishes the United States as a model for the reduction of greenhouse gases. A five-year extension of the ITC will lead to more than $133 billion in new, private sector investment in the U.S. economy by 2020. And much of this growth will come from small businesses, which make up more than 85% of America’s 8,000 solar companies.
Solar power in this nation will more than triple by 2020, hitting 100 GW. That’s enough to power 20 million homes and represents 3.5% of U.S. electricity generation.”
Today we celebrate the progress our country has made. We know the tax extension will only serve to help more and more property owners take advantage of all the benefits of solar energy. Happy Friday and Happy Holidays everyone!!
We recently came across some analysis of future energy trends depicted in the International Energy Outlook 2011 published by the U.S. Energy Information Administration (hat-tip to the folks at Climate Denial Crock of the Week). What struck us was how a simple change in U.S. tax policy will have a potentially devastating impact on the solar industry in this country.
Here is a graph that we have derived from the IEO data which shows the projected growth in installed solar generating capacity based on existing government policies for the US, Europe, Japan and China. (IEO’s total predicted solar capacity worldwide by 2035 is 119 GW.)
The first thing we noticed is that the US - the blue line in the graph - takes off in 2008, stays ahead of both Japan and China until 2017 when China shoots past us, and stays largely flat thereafter. Flat, as in dead, moribund, kaput! Meanwhile, Europe leads everyone, but sees its explosive growth scaled back dramatically in 2013. Even China’s growth is projected to flatten out after 2020. Indeed, only Japan shows significant growth after 2017, tripling its installed capacity from 9 to 27 Gigawatts by 2032.
We will leave it for others to comment on what is happening elsewhere, but here in the U.S. the obvious reason for the enormous reduction in growth after 2016 is the expiration of the 30% federal investment tax credit for solar installations. Indeed, the U.S. growth rate from 2008 to 2017 is just under 27%! But under the existing law’s sunset provision at the end of 2016, the overall projected growth rate from 2005 to 2035 is only 8.8%, with nearly all of that front-loaded.
Which has us wondering, what might happen if the U.S. were to retain its existing tax credit for solar installations indefinitely? After all, federal tax subsidies for the fossil fuel industries have been in place for a very long time so it only seems fair to give the new kid on the block a similar benefit. Here’s the chart again this time showing the U.S. with a long-term tax subsidy in place, but with somewhat moderated growth, declining from the ~27% depicted before to just 20%.
Wow - let’s hear it for compound interest! A stable U.S. tax policy for solar investment, even with a moderated growth rate, could lead to this country more than doubling the EIA’s present-policy prediction for worldwide solar by 2035! Put another way, under such a policy and growth rate, the installed U.S. solar generation capacity would be roughly one-fourth of the present U.S. total capacity of just over 1 TW.
All of which is just another reminder that policies matter and choosing leaders with the vision to support such policies is a very important piece of building a future where solar and other renewables can move us away from polluting energy sources.
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