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Green Building News

Solar Groups At Odds Over Tax Credit Strategy

There is no consensus on the best way to address the looming end to the federal tax credit for residential PV installations

Solar advocates fear that next year's scheduled end of the federal tax credit for residential solar equipment will cost thousands of jobs, but the nation's two trade groups can't agree on how best to convince Congress to extend it.
Image Credit: EnergySage.com

Solar energy advocates worry that the expiration of a 30% federal tax credit for residential solar equipment at the end of 2016 will result in thousands of lost jobs and many fewer installations of photovoltaic (PV) systems. But the country’s two solar trade groups can’t agree on how or even whether to join forces to fight for an extension of the tax credit.

One group, the Solar Energy Industries Association (SEIA), recently asked the Solar Electric Power Association (SEPA) to kick in $2 million for a lobbying effort to retain the income tax credit (ITC), Greentech Media reports. But SEPA said no, citing fears that getting involved in a campaign might threaten its reputation as an “unbiased educational organization.”

Citing documents obtained by Greentech Media, Stephen Lacey reports SEIA chief Rhone Resch and board Chairman Nat Kreamer wrote a joint letter to SEPA president Julia Hamm expressing their concerns and asking for money to lobby for an extension.

They warned that a failure to keep the credit would mean the loss of 100,000 jobs and a 60% drop in the number of U.S. PV installations. They’re also concerned that a large trade show organized jointly by the two groups, Solar Power International, would suffer.

“Solar Power International, the primary source of SEPA’s budget, would be severely impacted due to a lack of exhibitors, sponsors and attendees,” the letter said, according to Greentech Media. “Our ability to carry out our respective missions would be challenged.”

The appeal wasn’t enough for SEPA. “While SEPA fully appreciates the impact the ITC has had on the solar industry broadly as well as directly on Solar Power International, the Board determined that funding any elements of an advocacy campaign managed by a 501(c)6 may be detrimental to SEPA’s reputation as an unbiased educational organization,” Hamm replied in an email.

ITC viewed as critical to solar’s growth

Since the tax credit went into effect in 2006, it has helped annual PV installations to grow by more than 1,600%, SEIA says. The credit was extended in 2008, but it will end entirely for residential systems and drop from 30% to 10% for commercial systems unless Congress intervenes by the end of 2016.

“The solar Investment Tax Credit is one of the most important federal policy mechanisms to support the deployment of solar energy in the United States,” the group’s website says. “The ITC continues to drive growth in the industry and job creation across the country.”

The tax credit encourages homeowners to invest in solar equipment by knocking 30% of the cost of the system off their tax bills. If, for example, a homeowner invests $10,000 in a PV system, he or she can deduct 30% of that ($3,000) from taxes owed at the end of the year. An end to the ITC means that PV systems will rise in cost by 30% overnight.

The SEIA says that the tax credit is responsible not only for “dramatic” increases in the number of systems that have been installed but also for an 86% growth in solar employment in the last four years, and a jobs creation rate nearly 20 times higher than overall employment growth.

It also creates “market certainty” for companies, making them feel comfortable with long-term investments in the industry. That spurs technological innovation and lowers costs for consumers, SEIA says.

A difference in outlooks

Although both trade groups are nominally pro-solar, they have different missions and are categorized differently under federal tax laws. SEIA is a 501 (c)6 organization, Greentech Media said, while SEPA is a 501(c)3 group — the first a lobbying organization and the latter an organization limited to educational work.

Officers on SEPA’s board of directors all are utility executives, as are many of the directors. SEIA’s board, on the other hand, includes a number of executives with such companies as SunPower Corporation, SolarCity, First Solar, and Standard Solar.

Although it’s easy to surmise that the strong presence of utility executives on the SEPA board is what’s driving its lack of enthusiasm for an ITC lobbying effort, Hamm said that non-utility board members also thought that advocacy was inappropriate.

Hamm told Greentech Media that SEPA was still thinking about how it might participate in the ITC debate. “We’re certainly not ignoring it,” she said. “We just don’t have an agenda. Not having an agenda ensures that any research we conduct will be credible.”

4 Comments

  1. User avater
    Reid Baldwin | | #1

    ITC is not the biggest issue
    As someone who is considering installing a PV system in 2016, the ITC certainly influences my decision but it is not the biggest issue. If the price trajectory of PV continues, the cost of installing it in a couple years is about the same as installing it soon even if the ITC goes away. The big issue is the net metering policy. The utilities are attempting to reduce the credit I would get for the electricity I would generate by factor of four or five. There is no way I will invest in a system until the rules for net metering are set and only then if they are at least close to as favorable as current rules.

  2. Ven Sonata | | #2

    Fat in the system
    I suspect if the ITC is not renewed a mysterious decrease in the price of installed PV will quickly follow. There is just too much incentive to charge more when that 30% carrot is dangled. We will see. As to Reid Baldwins concern about net metering and the whimsical nature of the utilities, that is why we will see self storage entering the picture soon. The combined price of the new batteries and PV are just not that much, especially if you are a conscious user of electricity. The desire to just get past all the government and utility nonsense will motivate people to become highly self sufficient. No need to go off grid, but 90% self supply is quite easy to attain these days.

  3. Wes Stewart | | #3

    Good riddance
    There never should have been subsidies in the first place. If solar is a viable technology it should stand on its own merits. Furthermore, why should I be taxed to buy my neighbor's PV system?

    And please, don't argue that big oil or big electric gets subsidies too. That's the playground argument that Johnny did it too.

  4. Alan B | | #4

    @ Wes
    In that case lets cut

    @ Wes
    In that case lets cut the oil subsidies and require them to pay it all back with interest plus the estimated growth they enjoyed from those subsidies.
    Level playing field, right?

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