ALTERNATIVEENERGY BY CHUCK ROSS
With December’s omnibus spending
and tax bills, the U.S. Congress played
the rescuer here. In return for lifting a
40-year-old ban on U.S. oil exports, legislators extended 30-percent investment
tax credits for commercial and residential solar projects that were set to expire
at the end of 2016.
According to the terms of the separate
residential and commercial extensions,
tax credits will remain at the 30 percent
level through 2019, declining to 26 percent in 2020 and 22 percent in 2021. The
residential credit disappears entirely
in 2022, while a permanent 10 percent
credit will remain in place for commercial projects.
With the previously planned expiration of the credits on Jan. 1, 2017,
renewable-energy advocates had feared
an abrupt drop-off in new development.
Instead, the solar industry will continue
a growth trajectory that could lead to a
20-gigawatt (GW) annual solar market
Rhone Resch, president and CEO of
the Solar Energy Industries Association
(SEIA), issued a statement predicting
the five-year extension plan will add up
to 220,000 new jobs, along with $133
billion in new investments by 2020. In
addition, the SEIA anticipates total solar
capacity will reach 100 GW, which is 3. 5
percent of total U.S. electricity generation, by 2020.
M.J. Shiao, director of solar research at
GTM Research, said the tax-credit exten-
sion takes some of the immediacy off of
the rush that would have occurred this
year if the credit not been renewed. The
tax credit’s previous iteration required
projects to be completed and grid-
connected before the end of 2016. As a
result, developers were anticipating pos-
sible supply bottlenecks and difficulties
with utilities not able to meet aggressive
“Suddenly, you don’t have all these
systems rushing to get done,” Shiao said.
The potential deadline led to the creation of several short-term projects, but
now, with the urgency eased, the focus
can shift to the long term, as well.
“This year will still be huge because
there are a whole lot of projects under
construction,” Shiao said. “I think there
has been a huge sigh of relief, at least in
Shiao said the new versions of the tax
credits offer developers some longer-term
benefits. First, the structure of the cred-
its reduces the potential for cliffhanger
stress this time around. The scheduled
step-downs over a two-year period should
help the market experience a softer land-
ing in 2022 when the credit disappears.
In addition, the extension legislation now
allows projects to qualify for credit in the
year construction commences. Previ-
ously, credit could be claimed only after
construction was completed and the asset
had been put into service.
These two provisions could smooth
the transition when the extended credits reach expiration. As a result, Shiao
doesn’t anticipate a repeat of last year’s
drama at the end of this five-year plan.
“A number of things come into place
[by 2022], the biggest being the Clean
Power Plan, which should do a num-
ber of things to spur solar and other
renewables,” he said, referring to the
Environmental Protection Agency’s
effort to reduce energy-related carbon
emissions at the state level. The plan’s
mandated emissions reductions begin
taking effect in 2022, which could
result in new state-level incentives for
nonemissions-related technologies, such
as solar power.
Shiao said current cost-reduction
trends could well eliminate, or at least
reduce, the need for future incentives.
“We’re expecting anywhere between
25 percent to 35 percent system-cost
reductions in the next five years,” he said.
“It’s going to come from all points of the
Shiao sees untapped opportunities
in reducing solar-power systems’ “soft
costs,” which can include everything
from marketing and other customer-acquisition expenses to financing and
contractors’ salaries. However, location will remain a key determinant in
whether the financials for any given
project make sense, with or without tax
credits. With electricity rates and generation portfolios differing greatly from
state to state, the United States is essentially 50 individual markets, rather than
a monolithic whole.
Are there places that could compete
without the 30 percent tax credit?
“Possibly,” Shiao said. “That’s the
thing with the U.S.—it’s kind of a spectrum of states where solar makes sense.”
He cited Hawaii, where rates can top
$0.35 per kilowatt-hour.
Back From the Brink
Tax credit extension salvages solar’s future
WHEN WE LAST LEFT THE U.S. SOLAR-POWER INDUSTRY, it was staring
at a fiscal cliff. In “Clouds Ahead for Solar” (ELECTRICAL CONTRACTOR, December
2015), we reported on the possible expiration of two important tax credits at the
end of 2016 and how this could mean the loss of thousands of solar-related jobs and
billions of dollars of related investment. Then, just as in an old-fashioned serial, our
hero was pulled from the brink.
RO S S is a freelance writer located in Brewster, Mass. He can be reached at email@example.com. IST