Houston — Backers of solar generation in the US are gearing up to push for a congressional extension of the critical Investment Tax Credit, with one analyst group saying Tuesday that a 10-year extension to 2030 could result in the development of 308 GW of solar generation, or 82 GW more than if there is no extension.
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"The utility-scale segment will see the greatest benefit of the tax credit extension, with 63 GW of the 82 additional GW coming from that segment, as solar will gain ground against other generation resources based on price competitiveness," Colin Smith, a senior analyst with Wood Mackenzie, said in a release by the Solar Energy Industries Association Tuesday.
Wood Mackenzie senior analyst Austin Perea added, "the distributed solar segment will benefit as well, as a tax credit extension accelerates the timeline for which emerging state markets achieve grid parity relative to our base case outlook."
The SEIA said in its recent second-quarter 2019 market report that US solar generation now installed totals 69.1 GW.
The ITC, which was passed by Congress and implemented in 2016, has given investors a 30% tax break on their residential and commercial solar investments. The entity that installs, develops and/or finances the solar project claims the credit.
The credit, however, is scheduled to begin "stepping down" at the end of this year.
Eligibility for the ITC is based on a "commence construction" standard, and the US Internal Revenue Service issued guidelines in 2018 on the requirements taxpayers must meet to claim the ITC.
Investors in residential projects operate under somewhat different timelines than investors in commercial -- or utility-scale -- projects.
The ITC is based on the amount of investment in solar property. Both the residential and commercial ITC are equal to 30% of the basis that is invested in eligible solar property that has begun construction through 2019.
The ITC percentages then "steps down" according to the following schedule: 26% for projects that begin construction in 2020; 22% for projects that begin construction in 2021; after 2021, the residential credit drops to zero, while the commercial credit drops to a permanent 10%.
Some solar supporters are saying they would like to see Congress extend the 30% ITC for commercial and residential solar projects through 2030.
PUSH BY LAWMAKERS
On June 19, 20 US senators, all Democrats, sent a letter to Senate Majority Leader Mitch McConnell, a Republican, saying that the "decrease" of both the commercial and residential ITC "should be delayed at least as much time as it will take to implement a technology-neutral incentive or other federal legislation to reduce carbon emissions from electricity generation."
On July 25, legislation was introduced in both the House and Senate that would extend the full 30% ITC for five years, rather than allow a phase-down at year's end.
Representatives Mike Thompson, Democrat from California, Paul Cook, Republican from California, and Brian Fitzpatrick, Republican from Pennsylvania, introduced House Bill 3961. Senator Catherine Cortez Masto, a Democrat from Nevada, introduced Senate bill 2289.
The Renewable Energy Extension Act of 2019 would also extend the ITC for other clean energy technologies, including fiber-optic solar, fuel cells, small wind, micro turbines, combined heat and power, and geothermal heat pumps.
VIEW THROUGH 2030
In a report prepared for the SEIA and released Tuesday, Wood Mackenzie Power & Renewables focused its analysis on an extension of the 30% ITC to 2030 for residential and commercial solar.
The report said that if the ITC is extended at 30% to 2030, "308 GW of solar will be installed from 2020-2030," compared with 227 GW under the base case forecasts using the current ITC step-down scenario.
"The US will install 82 GW more solar under a 30% ITC scenario relative to the base case ITC phase-down, representing a 36% increase over base case forecasts," the Wood Mackenzie report said.
An ITC extension "drives extensive utility-scale growth," the report said, "as solar becomes lowest cost generation resource in many markets."
Under the base case, the report estimates 155 GW of new utility-scale generation during 2020-2030, while it forecasts 218 GW of utility-scale solar generation if the ITC is extended to 2030, a 62.5 GW increase over the base case scenario.
Wood Mackenzie said that distributed solar "continues to grow throughout the 2020s as an increasing number of emerging markets reach grid parity earlier than under the base-case scenario."
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