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Green Building News

Congress Poised to Give Renewables a Big Boost

A spending deal due for a vote this week would keep tax credits for solar and wind projects on the books for several more years

A deal in Congress would mean continued federal tax credits for photovoltaic systems — a shot in the arm for PV installers, PV manufacturers, and homeowners interested in investing in a PV system.
Image Credit: Building America

UPDATE: Both the House and Senate passed this legislation on December 18. President Obama was expected to sign it into law. For more, read this.

Congress tackles a spending bill this week that promises to keep federal tax credits for solar and wind projects intact as part of a deal ending a ban on U.S. crude oil exports.

The $1.15 trillion spending bill announced earlier in the week would extend the Production Tax Credit for wind projects through 2020, a post at Greentech Media said, while the Investment Tax Credit (ITC) for solar projects would stay at the current 30% through 2019 before falling over the next several years to 10% in 2022.

The ITC had been scheduled to drop to 10% for commercial projects and disappear altogether for residential installations at the end of 2016. The tax credit for wind projects was dropped at the end of 2014, but developers who had started construction were able to make use of it this year.

Cory Honeyman, a senior solar analyst at GTM Research, said that the tax credit extension is “without question a game-changer for U.S. solar’s growth trajectory.”

Lawmakers were expected to vote on the measure Thursday night or Friday morning, and while Democrats have said they support the plan, there is still opposition to permitting oil exports for the first time in 40 years. Democrats view that as an oil industry subsidy as well as an environmental threat.

The impact of continued tax credits would be huge.

GTM Research predicted that the tax credit extension would result in 25 gigawatts of new photovoltaic (PV) capacity over the next five years, 54% more than would have been added without the credit.

“The ITC extension currently written into the omnibus spending bill will result in a 20-gigawatt annual solar market in the U.S. by 2020,” said Shayle Kann, senior VP of GTM Research. “At that rate, more solar will be installed each year than was added to the grid cumulatively through 2014.”

Honeyman added that continuing the ITC would likely result in utility-scale solar contracts for less than 4 cents a kilowatt hour “on a regular basis over the next two years,” GTM Research said.

No phase-out until 2022

Under the current proposal, the ITC would remain at 30% through 2019 before dropping to 26% in 2020, and to 22% in 2021. In 2022 and after, the tax credit would be pegged at 10% of the cost of a project for non-residential and third-party owned residential systems. Homeowners who installed systems on their own houses would get no tax credits after 2022.

GTM Research said that a “commerce-construction” provision allows projects coming online by the end of 2023 to qualify for the larger tax credits.

The ITC, along with falling prices for PV modules, has been a major driver of solar installations, and the move to keep it alive will provide a big boost for installers. The Wall Street Journal reported shares of SolarCity, the country’s largest installer, were up 34% on Wednesday on news of the deal.

The Solar Energy Industries Association says that the continuation of the tax credit could add as many as 140,000 jobs to the industry’s existing workforce of 200,000.

Wind projects will be able to claim a credit of 2.3 cents per kilowatt-hour through the end of 2016, before the production tax credit begins to fall. It would be phased out completely in 2020. The biggest markets for wind are in Texas and California. Patten Energy Group, which develops wind projects in the Texas panhandle and elsewhere, saw its shares close 11% higher on Wednesday. Its CEO said that the tax credit extension “will save jobs,” The Wall Street Journal reported.

Extending the tax credits for wind will cost taxpayers $14.5 billion, the newspaper said, while continued solar credits will cost taxpayers $9.3 billion.

12 Comments

  1. Alan B | | #1

    I can't say i understand the
    I can't say i understand the oil export issues in depth, but this sounds like a reasonable compromise (only because we are dealing with unreasonable reality deniers) because it would slightly raise domestic gasoline prices but support an industry we are working to bury, so while i would like to starve them now (starting with terminating their subsidies) giving them a boost now for long term progress in renewable energy is a pyrrhic victory for oil companies (as it should be)

  2. John Clark | | #2

    @Alan
    The export issue goes back to the oil embargo of the early 1970's as a national security issue (ie. We'll have plenty of oil at home in case we loose access to the wider market).

    While the oil industry does receive some subsidies many are indirect or available to other businesses. For example, businesses are allowed to depreciate the value of some assets (ex. the manufacturing equipment needed to make PV arrays), in the resource business that's called depletion (ex. X barrels of oil pumped out of a field reduces the amount of oil available and therefore the value of the field). Some oil 'subsidies' are actually indirect and the two largest oil subsidies in the industry are with regards to the Strategic Oil Reserve and the fuel tax exemption (diesel) for farmers.

    Remember two things: The State uses force to distort markets at the expense of its citizens. The State constantly fails in its ability to set prices (Economies of Cuba, Russia, Venezuela, Argentina).

  3. User avater GBA Editor
    Martin Holladay | | #3

    Response to Chris M
    Chris,
    You wrote, "The State uses force to distort markets at the expense of its citizens."

    That's not always true. The decision of our government to provide firefighting services to homeowners at no direct expense to the homeowners is an example of a market distortion that helps citizens. Another example: the decision to subsidize the cost of medical care for our elderly citizens through the Medicare program. Still another: the decision to provide primary and secondary education to U.S. citizens at no direct cost to the pupils.

    However, the U.S. decision to create and support the nuclear power industry (through covering all liability in the case of an accident) is an example of a market distortion that may not have been such a good idea.

    You wrote, "The State constantly fails in its ability to set prices." But it doesn't always fail. The state's decision to set the cost of firefighting services at $0 has been successful. The price of $0 is not being undermined by private firefighting companies.

  4. User avater
    Stephen Sheehy | | #4

    Solar subsidy
    $9.3 billion is a lot of money. You could build a big nuclear plant for that and have it ready by 2025, producing 1% of the power that the annual additional solar will be producing.

  5. John Clark | | #5

    @Stephen
    If it weren't such a security concern I would give almost anything to have my house powered by a self-regulating reactor that's about the size of a suitcase, buried in the back yard in a concrete box.

    Sign me up!!!

  6. User avater
    Stephen Sheehy | | #6

    Too cheap to meter
    When I was a kid, your small nuke unit was assumed to be the future of electric power. Fifty years later, it's still the future solution. Sort of like fusion:-)

  7. Chris Plucker | | #7

    too cheap to meter
    Remember the us nuclear energy industry has provided 20% of the nations electricity for the last 40 years or so essentially carbon free all day all night base load power. if carbon free is the goal its contributions should not be overlooked

  8. KEVIN ZORSKI | | #8

    Oil company subsidies
    Every road built and paved in our country is a subsidy paid by your taxes for oil companies to sell oil. If there was no pavement, there wouldn't be a lot of gasoline being sold. The oil companies profit from the roads we build. Why don't they contribute towards their construction? This is an example of an "indirect" subsidy to the oil companies.In countries where the oil that comes out of the ground is owned by the country, not some corporation, the roads are in good shape and everyone has good healthcare(Norway). The solar tax credits are a good idea to stimulate business, employ people, and give a boost to energy security. Hey, everyone, have a great holiday and many thanks to Martin and all the contributors for all their good work and stimulating ideas.

  9. User avater
    Stephen Sheehy | | #9

    reply to chris plucker
    For better or worse, nuclear power won't be generating 20% of the nation's power in the future. Plants are being retired and not replaced. The four currently being built in GA and SC may be the last, as costs increase. $8 billion+ for 1000 MW is insane. I pity the ratepayers.

  10. Antonio Oliver | | #10

    Response to Comment 9
    Are those numbers really correct? About $8/watt. Does anyone know the safe lifespan of one of these power plants? I'd be interested to know what the baseline cost is before you add in any operational/maintenance costs to compare to other power sources.

  11. User avater
    Stephen Sheehy | | #11

    Reply to Antonio
    The numbers for the two plants are fluid, but the last I looked Vogtle was at about $19 billion for two units of about 1100 MW each and Summers was a bit lower. The completion dates keep getting pushed back. Supposedly they will go on line in 2019-20. Georgia Power's 47% share of the construction cost for the two GA plants was estimated at $7.5 billion and climbing.

    http://blog.cleanenergy.org/2015/07/07/hearing-on-new-vogtle-nuclear-reactors-provides-new-information-on-mounting-risks-and-costs/

    The plants are typically planned for 40 years, but can get extended. Nuclear plants have historically supplied fairly low cost, reliable base load power. But they simply cost too much, no one has done anything about the waste that needs to be isolated for many generations and no one will insure them.

  12. Antonio Oliver | | #12

    Thanks to S. Sheehy
    I think I have to agree that the cost cannot justify construction of a nuclear plant--insane is correct.

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