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Congress Extends the Solar Tax Credit

December 22, 2015 | Kerry Inserra

Rooftop solar companies across the country are rejoicing over the early holiday bonus they received in the form of a long-term extension of the solar tax credit. 

Lawmakers in the House and Senate passed a bill Friday, December 18th, 2015, that includes multi-year extensions of solar credits, plus additional extensions for a host of other renewable energy technology including wind.  President Obama is expected to sign the solar Investment Tax Credit (ITC) extension bill any day. 

So Just What is the Solar Investment Tax Credit?

For those readers not familiar with the solar Investment Tax Credit (or ITC), simply stated, it’s a 30 percent federal tax credit for solar systems on residential and commercial properties that remain in effect through December 31, 2016.  The homeowner then applies the credit to his/her income taxes. This generous tax credit is the single biggest incentive to encouraging more homeowners to go solar, relying less on energy from big utility companies.

What’s At Stake?

The commercial solar ITC was scheduled to drop from 30 percent to 10 percent and the residential tax credit was going to drop from 30 percent to 0% at the end of 2016.  Meanwhile, earlier this year in California (the biggest solar market) Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric proposed dramatic cuts to rooftop solar incentives.  As electricity prices continue to rise and fluctuate, more customers are motivated to go solar.

Just a mere six months ago, it looked like the solar industry was fighting for its life.  But with the passage of last week’s new solar ITC, homeowners and business owners will continue to have access to affordable solar energy.  As I referenced in last month’s Diablo Solar Blog, it certainly helps that Governor Jerry Brown is a big proponent of climate change here in the Golden State.  Governor Jerry Brown has worked to position California as an international leader in fighting climate change.  State lawmakers approved a 50 percent clean energy mandate a few months ago, and a robust solar market is seen as critical to meeting Brown’s target goal.

What Does the New Investment Tax Credit Bill Include?
Under the new solar legislation, the 30 percent ITC will be extended for another three years.  The residential credit will then slide down incrementally through 2020 then drop to 0 percent after 5 years. The new legislation also allows for PV projects to claim the credit for the year in which they begin construction.

According to the Solar Energy Industries Association (SEIA), “solar power in this nation will more than triple by 2020, hitting 100 gigawatts.  That’s enough to power 20 million homes and represent 3.5 percent of the U.S. electricity generation.” Solar is one of our planets most abundant forms of energy. This recent solar tax extension will continue to perpetuate the use of solar and encourage homeowners to become more energy independent.

Why the Solar Investment Tax Credit is Important.

The ITC is some of the most important federal policy legislation in terms of renewable energy.  According to Green Tech Media’s Director of Solar Research, MJ Shiao, “There’s no way to overstate this-the extension of the solar ITC is the most important policy development for U.S. solar in almost a decade.”

The continued success of the ITC seems to demonstrate that a stable, long-term incentive can drive growth, reduce prices and create jobs in the solar industry. 

Good to know that our political leadership agrees.