Solar Investment Tax Credit Extended to 2020 by Congress

Sandro Sacerdoti
CRES Boulder County Chapter

On December 18, 2015, Congress passed and President Obama signed an extension to the solar Investment Tax Credit (ITC) and the wind Production Tax Credit (PTC) as part of an omnibus spending bill to fund the federal government through September 30, 2016.

The ITC was set to expire at the end of 2016 for homeowner-owned residential solar and drop from 30% to 10% for commercial solar and third-party-owned residential solar. The bill extends the ITC at 30% through the end of 2019 and reduces it to 26% for 2020 and 22% for 2021. In 2022 the ITC drops to 0% for homeowner-owned residential solar and 10% for commercial and third-party-owned residential solar. Projects will be awarded the ITC applicable to the year in which construction of the project begins. Larger residential solar installers such as SolarCity install mostly third-party owned residential solar structured as leases or power purchase agreements, with SolarCity retaining ownership of the installed solar panels, therefore they will benefit from the 10% ITC in 2022 and beyond, while smaller installers who rely on homeowner-owned systems will not.

The PTC was retroactively extended for 2015 and will remain at its current level of $0.023/kwh through 2016. The PTC will phase down to 80% of its present value in 2017, 60% in 2018 and 40% in 2019. Wind projects qualify for the PTC as long as they start construction before the end of the period.

Rhone Resch, CEO of the Solar Energy Industry Association (SEIA) with the support of the U.S. solar industry is widely credited with orchestrating the lobbying effort to obtain the extension of the ITC and PTC. The Edison Electric Institute (EEI), the industry association of electric utilities, lobbied to block the extensions. SEIA won bipartisan support for the extensions and a significant victory for the solar industry by targeting Republican law-makers from states that that have seen significant employment gains from the solar industry and by hiring, among others, former Republican Senate Majority Leader Trent Lott as a lobbyist.

Democrats in the House and Senate extracted the ITC and PTC extensions from Republicans in exchange for lifting the ban on U.S. oil exports sought by the U.S. oil industry. The export ban has been in place since the oil embargo of the 1970s. The extension of the ITC is projected to add $40 billion of incremental solar investment and an additional 25 GW of solar capacity by 2020 according to GTM Research and averts a significant decline in solar project development that was expected to occur in 2017 if the ITC had been allowed to expire.