Any extension of the #solar investment tax credit faces a tightening window

While some members of Congress have sponsored bills that would extend the investment tax credit for solar energy, that window for passage is closing.  One question is, if the investment tax credits were to expire, would investment in solar deployment be negatively impacted?

An online article in The Wall Street Journal presents two arguments on what impact the expiration of investment tax credits may have on solar investment and deployment.  On one hand, supporters of the tax credit, which amounts to 30% reduction in the basis of eligible property invested in, believe that employment in the industry would be reduced by approximately 80,000 jobs in 2017.  Solar installations for residential customers would fall by 94% in 2017 while utility-scale projects would evaporate completely.  Supporters also argue that if prices for installing solar were to fall in the absence of the investment tax credit, deployment of solar would suffer.

Opponents of extending the investment tax credit for solar believe such an action may actually stimulate more investment and residential ownership of solar panels.  Getting rid of the investment tax credit would have a small impact because incentives for developers and residential consumers were never that big to begin with.  Financial middlemen absorbed almost half of the investment incentives leaving developers and residential consumers with effectively 15% of the incentives.  It’s estimated that if they were a rise in prices as a result of eliminating the investment tax credit for solar, that increase would be approximately 2.5%.

In addition, opponents argue that getting rid of the credit opens the door to alternative methods of financing solar deployment.  The market may see securitizing solar leases as one way of raising capital necessary for continued investment.  Also, self-financing may show itself a less expensive option than leasing should the credit be eliminated, especially in light of the falling prices for solar panel installation.  Ir’s estimated that self-financing lowers installation costs for residential consumers by 23% while commercial customers may see a reduction of 87%.

Whether an extension is passed in time before the end of 2016 depends on how well Congress leverages the time remaining between now and when campaign season really gets cranking up.  Staffers on Capitol Hill see the best time for legislative action to take place in the first half of 2016.

At least two bills of interest to the solar industry have been introduced in Congress.  HR 2412, introduced by Congressman Mike Thompson, Democrat of California, on 19 May 2015, would extend investment tax credits for solar and other renewables to 1 January 2022.  HR 2412 has 39 co-sponsors.

Senator Brian Schatz, Democrat of Hawaii, introduced on 14 July 2015 S 1755, a bill that would give residential consumers a five-year extension on the investment tax credit.  S 1755 has six co-sponsors.

Republicans have in the past expressed support for the investment tax credit.  For example, House committee on energy and commerce chairman Fred Upton, Republican of Michigan, supported extension of the investment tax credit in 2008.

The Democrats that have taken the lead on these initiatives will have to ramp up their efforts in order to beat the 31 December 2016 expiration.

About Alton Drew

Alton Drew brings a straight forward and insightful brand of political market intelligence. Alton Drew graduated from the Florida State University with a Bachelor of Science in economics and political science (1984); a Master of Public Administration (1993); and a Juris Doctor (1999). You can also follow Alton Drew on Twitter @altondrew.
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