The Solar Energy Industries Association (SEIA) just gave Congress 87 billion reasons to extend the solar Investment Tax Credit (ITC). Maintaining the credit through 2030 would create $87 billion in new private sector investment and add 113,000 American jobs, according to a recent SEIA forecast.
The solar ITC covers 30 percent of the value of a solar energy system and is slated to begin phasing out at the end of 2019. By 2022, the commercial credit will be slashed to 10 percent, and the residential incentive will be removed entirely.
A current forecast makes a strong economic case for continuing the credit. It projects an additional 82 gigawatts of additional solar power over the next decade if the incentive is re-upped. That’s enough to power almost two-thirds of all American single-family homes.
A bulk of the extension’s benefits would be felt in the utility-scale segment, analysts say. It would strengthen solar’s increasing ability to compete on cost against other generation resources in existing and emerging markets. Distributed generation uses, such as for local homes and businesses, would benefit as well by speeding up the timeline for solar to achieve parity with other generation sources.
Extension Faces an Uphill Political Battle
The SEIA has poured all of its political will into its “Defend the ITC” campaign focused on getting this extension passed. And for good reason – the group called the ITC “the single most successful policy driver for deploying clean energy.” It’s anchored solar’s staggering role in the growing renewable sector over the last 13 years. The U.S. solar industry has grown by more than 10,000 percent since the ITC took effect in 2006. It’s had a powerful economic impact to the tune of 200,000-plus jobs and $140 billion in private investment.
The economic and environmental impacts of the solar ITC have not been lost on Congress. But the political path to renewal is complex and dates back to a compromise struck by Republicans and Democrats in 2015. At that time, Democrats agreed to end the 40-year export ban on crude oil in exchange for an extension on the solar ITC and similar wind power incentives. As part of that bipartisan deal, Democrats agreed the 2015 extension would be the last.
But many lawmakers now argue the Trump administration’s policies have shifted the energy debate and are pushing to re-up the credits for another decade. U.S. Senator Chuck Grassley (R-IA) is not among them. The Republican Senate Finance chair, a longtime supporter of the credit, has stated he intends to honor his 2015 commitment to let it expire. Any path to getting the incentive passed in the Senate would have to go through Sen. Grassley and other Republicans.
The Edge: A Vote with Implications for the Entire Energy Industry
The debate over extending the solar ITC highlights the clear power lawmakers have to use incentives to influence the energy outlook in the U.S. That’s nothing new. The credit has established solar as a leading renewable energy source over the last 15 years, and the economic impact is undeniable. It only makes sense that the solar industry wants to extend those benefits for another decade.
Meanwhile, Congress’ vote on the incentives will have repercussions beyond just the solar sector. If approved, the extension of the ITC will continue to reshape pricing dynamics and shake up solar power’s competitive position relative to other energy sources These factors represent opportunities for businesses operating in the solar space.
If the ITC extension doesn’t pass, it will likely result in changes in the renewable sector and beyond. It will be worth keeping a close eye on where Congress shifts its attention next.