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US Solar Industry Confronts a Dwindling Subsidy

January 12, 2021


The federal Investment Tax Credit (ITC) helped legitimize the solar industry by providing a 30% tax reduction on total project costs for the duration of the subsidy’s lifespan. At the end of 2019, the ITC dropped to a 26% credit, and next year will lower to 22% before leveling off at 10% for commercial and utility projects and disappearing entirely for residential.

The House voted on a national spending package in December that removed an extension for the ITC, leaving the renewables subsidy on its original course of descent.

The Solar Energy Industries Association (SEIA) led a lobbying effort to extend the ITC for months leading to the end of 2019. SEIA put its membership of solar industry employees in touch with their respective district’s legislators to push for an extension; members gathered in D.C. for days of lobbying; and the group backed studies on the effectiveness of the ITC, a tax subsidy responsible for assisting an industry that’s created billions in revenue and job creation in the hundreds of thousands.

If the ITC were extended for another 10 years, that report estimated an additional 82 GW of solar would come online in the United States.

“Anything that has what essentially amounts to a 30% discount, that’s extremely helpful,” said Blake Jones, co-founder and co-owner of Namasté Solar, in a story previously written on the ITC for Solar Power World. “I think there would still be customers that would go solar without the 30% tax credit, but there’s no doubt that the market would be smaller [without the ITC].”

The ITC was created as part of the Energy Policy Act of 2005. It started in 2006 and was renewed in 2007 and 2008 as a jobs creation tool, and was extended once more in 2015. Unlike renewables, fossil fuels have historically been subsidized, and remain so today.

The latter half of 2019 was marked by frequent support for an ITC extension from industry members, and public officials; from city mayors to the 28 members of Congress who addressed Speaker Nancy Pelosi on behalf of the tax credit. Members of the House Ways and Means Committee proposed the Growing Renewable Energy and Efficiency Now (GREEN) Act, a five-year tax package that included an ITC extension but has not seen passage.

Now, the ITC has begun ramping down, and it doesn’t appear legislators will extend it. In December, SEIA released a report with Wood Mackenzie Power & Renewables stating that 2019 was the most successful year for U.S. residential solar ever, undoubtedly due in part to installers taking advantage of the ITC.

“While I’m disappointed by this missed opportunity to boost the U.S. economy and jobs, and tackle climate change, I’m heartened that voter support for clean energy policies is at an all-time high,” said Abigail Ross Hopper, CEO of SEIA, in a press statement. “The solar ITC is a proven way to generate tens of billions of dollars in private investment each year, while substantially reducing carbon emissions.”

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