Late last night (Dec. 16) Congress introduced its omnibus appropriations bill, which extends tax breaks and allows the government to continue operating. In it the House and Senate extended Investment Tax Credit (ITC), which helps offset the cost of solar power materials, and the Production Tax Credit (PTC), which helps offset the costs of wind power. The moves were ballyhooed by the renewables industries. However, the House and Senate still have to vote on the massive bill, which could happen by the end of the week.
Under the proposal the ITC will remain at the current, 30 percent level until the end of 2019. In 2020 it will be reduced to 26 percent, then 22 percent in 2021 and to 10 percent in 2022. It also contains a commence construction clause that will allow projects in development before 2024 to reap the benefits of the credit—however at present it looks like the 10 percent clause will only impact commercial projects.
"The extension to the federal ITC is without question a game-changer for U.S. solar's growth trajectory,” said Cory Honeyman, a senior solar analyst at GTM Research. “Between now and 2020, the U.S. solar market is poised to see a number of new geographies open up with a 30 percent ITC, within both distributed and utility-scale solar.”
In addition to extending the credits the legislation also steps the credits down over time, allowing the industry to better prepare for the reductions in credits as the costs of the technologies go down and become more efficient at the same time. Both of those factors will help wind and solar be at cost parity with other energy sources and hopefully reach parity as the incentives are reduced. They also make solar and wind more attractive to investors.
"By extending the solar investment tax credit for five years with a commence construction provision and a gradual ramp down, bipartisan members in both Houses have reestablished America as the global leader in clean energy, which will boost our economy and create thousands of jobs across America,” said Solar Energy Industries Association President Rhone Resch.
“A five-year extension of the ITC will lead to more than $125 billion in new, private sector investment in the U.S. economy. And much of this growth will come from small businesses, which make up more than 85 percent of America’s 8,000 solar companies,” Resch said. “Over the last year, these companies told us they needed the extension of the ITC to provide their businesses with certainty, and SEIA has been working tirelessly to achieve that goal.”
“Currently there are 200,000 solar jobs, and the extension is likely to add another 140,000 jobs or more,” Resch said. “And with this extension, the solar industry can achieve its pledge of employing 50,000 veterans by 2020, a goal our industry takes very seriously. These jobs are stable, well-paying and cannot be exported overseas.”
As if to show how ready the solar industry is to grow and add employees, residential and commercial solar installer Sungevity, a new $650 million equity and project financing round led by GE Ventures, Apollo Investment Corp. and others, this morning. Sungevity said the partnership could lead to 400 megawatts of new solar installed.
The wind energy industry also is buoyed by the bill’s extension of the PTC. “If this passes, our industry will get a break from the repeated boom-bust cycles that we’ve had to weather for two decades of uncertain tax policies,” said Tom Kiernan, CEO of the American Wind Energy Association. “AWEA has sought greater stability in the credit, with an extension for as long as possible. This plan will drive more development, and near-term prospects look strong – especially as utilities, major end-use customers, and municipalities seek more low cost emissions-free renewable energy.”
While the news is good for the renewables industries there, of course, were concessions. For instance, the bill would lift the ban on U.S. crude oil exports, which has been illegal since 1975.
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