Don’t let ITC Become the speed bump on solar’s growth road

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on reddit
Reddit
Share on email
Email

This past year, the solar industry in the US achieved a record year – growing by 34% over 2013 and installing nearly 7,000MW of solar electric capacity. In 2014, solar energy came in second only to natural gas in terms of all new electricity generating capacity in the US. At this pace, the solar energy industry is expected to grow rapidly, with an additional 20,000MW of solar capacity projected over the next two years.

But there’s a potential speed bump on that road to growth – the upcoming expiration of the solar investment tax credit (ITC).

The solar ITC has been, and continues to be, one of the most important federal policies in support of solar energy in the US. The 30% tax credit on solar systems for residential and commercial properties has been key to encouraging home and property owners to enter the solar energy market. We’ve especially seen the impact this year on the residential side, with more and more homeowners now seeing solar panels as an affordable energy alternative and cost savings measure. 

While there are some that would see this growth as a sign that the ITC is no longer needed, the truth is that it remains a key component in this drive for growth – remove it and risk slowing down the system significantly.

We’ve seen this happen before. Uncertainty over the extension of the production tax credit (PTC) was a blow to investment confidence in wind energy and led to numerous delays and disruptions in potential projects. When Congress failed to extend the PTC in 2013, new wind installations came to a halt. According to the American Wind Energy Association (AWEA), this resulted in a 92% drop in new wind projects compared to 2012 and a US$23 billion drop in private investment. This echoed similar historic drops seen in 2000, 2002 and 2004 when the PTC had been allowed to expire, creating a pattern of boom and bust in the wind industry. After a relatively steady period of growth, the PTC expiration of 2012 brought this cycle back.

Thanks to extensions late in the year in 2013 and 2014, which allowed projects to qualify by beginning construction or investment within the year and completing in 2015 and 2016, the wind energy industry is currently back in a boom growth period. But for many investors, questions remain about what will happen in the wind industry once these new projects are online. Will there be another lull in development?

Considering the importance of solar energy to the future of energy in the US, it is imperative to avoid this type of uncertainty and disruption. While there are alternative sources of financing available, the truth is that the ITC can often make the difference between a viable project and one that is not. Based on a developer’s access to tax equity, a project can expect to offset about 35 to 45% of installation costs. For solar developers, installers, manufacturers, financial institutions and other investors, the existence of long-term, reliable ITC can position solar as either a viable or fringe sector.  

It’s not just direct solar industry participants that benefit from the continuation of the ITC, though. The ITC is playing a key role in shaping the future of energy in the US.

Energy reliability

Much has been said in recent years about the need to improve the electric grid system in the US. Not only does the system need to be modernised to address management and security concerns, but also in certain areas, the strain of ageing infrastructure has begun to show under high energy demands. Distributed solar energy can help to ease some of that congestion with systems located near areas where demand is highest. As energy storage systems continue to improve, the amount of relief from such developments will only increase – providing grid operators with more flexibility on when and how to dispatch energy.

Climate change leadership

In 2010, solar energy represented just 0.1% of US electric capacity. Thanks in great part to the success of the ITC, that’s changed significantly. It’s estimated that by the end of 2016, solar energy will be generating 2% of the electricity in the US. This would offset nearly 45 million metric tons of harmful CO2 emissions – the equivalent of removing nearly 10 million cars off US roadways (saving 5 billion gallons of gas) or shuttering 12 coal-fired power plants.

Still, the US remains significantly behind European countries in the adoption and use of solar energy. This past year it was estimated that 3% of electricity in Europe came from solar energy. The share is even more significant when we consider solar energy leaders such as Germany, which saw 50% of electricity from solar use. Effective public policies are part of why solar has been so successful in Europe. And, according to International Energy Agency (IEA), given such effective policies worldwide, solar energy could be poised to be the world’s largest source of electricity by 2050.

Public support

In the past few years, the American public has begun to show that it’s ready to seriously consider solar energy options as a viable alternative to traditional energy sources. According to recent polls from research groups such as Gallup, nine out of 10 Americans support the use of solar energy. That support is being reflected in 570,000 residential installations and counting. It’s also being reflected on the business side, with more companies, municipalities and the like incorporating solar installations into their business plans – both for conservation and for cost savings.

It’s clear that solar is becoming more recognised as an energy resource by the public. It’s clear that it’s poised to play an important role in providing the US with a clean, energy independent future. Now is not the time to risk a significant slowdown of solar energy, but rather use drivers such as the ITC to establish it as an integral part of the energy mix.

Congress must decide if the US solar investment tax credit is to be granted a reprieve
19 July 2022
As New South Wales is gearing up to become a renewable energy superpower, an exciting clean energy event is coming to Sydney. Energy Next is a free-to-attend industry event focusing on the latest renewable energy and energy management technologies, which will be held from 19-20 July 2022 at the ICC Sydney in Darling Harbour. Organised by the same people behind the country’s largest clean energy event, All-Energy Australia, Energy Next will bring a quality exhibition and technical session series to NSW. Energy Next will also host the Clean Energy Council’s Solar Masterclass with a program developed for solar designers and installers. Across two days, Energy Next will provide an extensive exhibition, workshops and networking opportunities for those working in the renewable energy industry to meet with leading suppliers, discover the latest technologies and gain an understanding of how to successfully launch new clean energy projects.
21 July 2022
The rooftop solar PV market is set for significant growth, but installers are being held back by complicated design software that is slow, cumbersome and fails to take into account rooftop shading, module compatibility and energy storage. Huawei’s SmartDesign 2.0 is a web-based PV and energy storage system tool that promises to solve all of those issues, and much more. This webinar will provide a live demonstration of the SmartDeisgn 2.0 tool, showing how installers can quickly complete Huawei PV & ESS system designs and assemble a professional report with 3D site view for potential customers, streamlining the design and sales service.
23 August 2022
Intersolar South America, South America’s largest exhibition and conference for the solar industry, takes place at the Expo Center Norte in São Paulo, Brazil, on August 23–25, 2022, and has a focus on the areas of photovoltaics, PV production and solar thermal technologies. At the accompanying Intersolar South America Conference, renowned experts shed light on hot topics in the solar industry. In 2021 – despite the Covid-19 pandemic – Intersolar South America welcomed more than 28,000 visitors and over 1,000 conference attendees over 3 days. 200+ providers showcased their products. Combining local and international expertise, Intersolar South America brings together the PV and solar thermal sector to discuss the current status and strategic trends for Latin American PV markets, as well as technology innovations and new business opportunities. Overall, distributed generation is still driving momentum in the Brazilian market.
6 September 2022
Intersolar Mexico sits at the cross-section of photovoltaics, solar heating & cooling technologies, and energy storage. The event serves as the industry’s go-to source for invaluable technology trends and premier B2B contacts in the promising Mexican solar market. From September 6–8, 2022 Intersolar Mexico together with the co-located The GREEN Expo® and Aquatech Mexico will take place in Centro Citibanamex, Mexico City.
19 September 2022
RE+ 2022 is the umbrella event that includes SPI, ESI, RE+ Power, and RE+ Infrastructure. As North America's largest renewable energy event, it's a catalyst for industry innovation that's supercharging business growth in the clean energy economy.
20 September 2022
From source to generation, from grid to consumer, the boundaries of the sector are blurring and this evolution is being shaped by established players, external disruptors, innovative start-ups and the increasingly engaged end-user. Enlit Asia is the unifying brand for POWERGEN Asia and Asian Utility Week, showcases expert knowledge, innovative solutions and foresight from industry leaders, coherent with Asian strategy to achieve a smooth transition towards a low carbon energy supply. This year, Enlit Asia will be co-located with Sustainable Energy Technology Asia (SETA) & Solar & Storage Asia (SSA).

Read Next

June 29, 2022
The US solar industry is facing fresh module shipment delays after new import documentation was demanded by Customs and Border Protection (CBP).
June 29, 2022
Arab-speaking countries in the MENA region have planned to increase utility-scale solar capacity by 49.5 GW by 2030, according to Global Energy Monitor.
June 29, 2022
Spanish developer Grenergy has launched a €90 million (US$94.8 million) accelerated capital increase to fuel growth in Europe and develop its energy storage capacity.
June 29, 2022
A round-up of the latest news from the US solar market, including EDF Renewables selling its 270MWdc Huck Finn Solar Project to a local utility, CS Energy partnering to deliver New York community solar and NextEnergy Capital expanding its US presence.
June 29, 2022
The US solar industry added 17,212 jobs in 2021, up 5.4% on 2020 figures, with 40% of all US energy jobs now focused on the transition to a net zero economy, according to the Department of Energy’s (DOE) US Energy and Employment Report (USEER).
June 29, 2022
Spanish independent power producer (IPP) Opdenergy is planning to launch an initial public offering (IPO) to finance its target of reaching 3.3GW of renewables assets in operation and under construction by 2025.

Subscribe to Newsletter

Upcoming Events

Solar Media Events
October 4, 2022
New York, USA
Solar Media Events
October 11, 2022
Virtual event