Tag Archives: Solar Incentives

Everything You Need to Know About the Solar Investment Tax Credit

The Solar Investment Tax Credit (ITC) is one of the most popular and successful federal policy mechanisms ever enacted to support renewable energy in the US. In the 14 years since its enactment, there has been 59% compound annual solar growth nationwide. With the step-down of the tax credit beginning at the end of 2019, potential solar customers have limited time left to take full advantage of its benefits. 

 

What is the ITC?

The ITC is a tax credit can be claimed on federal corporate income taxes for 30 percent of the cost of a solar photovoltaic (PV) system that is placed in service during that year. The tax credit is claimed against the tax liability of residential and commercial investors in solar energy property. This credit is used when homeowners purchase solar systems outright and have them installed on their homes or when businesses install, develop and/or finance solar projects.

 

History and Future of the ITC

The ITC was originally established by the Energy Policy Act of 2005 and was set to expire at the end of 2007. Due to the success of the program Congress has extended its expiration date multiple times, most recently in 2015. That extension set up the tax credit to step down to 26 percent for projects that begin construction in 2020 and 22 percent for projects that begin in 2021. After 2021, the residential credit will drop to zero while the commercial and utility credit will drop to a permanent 10 percent.  


 


Impact of the ITC Step-Down

According to Energy Information Administration data in 2015 (when the ITC was scheduled to expire at the end of the next year), if the 30% credit was not extended, rooftop solar photovoltaic installations would plunge 94% in 2017 and utility-scale projects would decline 100%, with neither recovering anywhere close to today’s levels even a decade from now.  Bloomberg predicted solar installations would drop by two-thirds in 2017, which the Solar Energy Industries Association estimated would cost America 100,000 jobs.

The economic projections aren’t as grim this time around. A study from Bloomberg estimates that the loss of the tax credit will cause solar capacity to only quadruple, instead of quintuple, by 2022, which is still a substantial increase. A Wall Street Journal analysis reinforces this assessment. 

So, what has changed over the last few years to mitigate the effect of ITC’s decline? For starters, this stepdown is less severe than the proposed 2015 iteration, which called for a straight drop from 30 to 10 percent. The more gradual step-down, combined with recent legislation that allows homeowners to claim their tax credit as soon as the construction of the system begins (as opposed to when the system is operational), will allow significantly more installs to qualify for a higher credit. Additionally, solar installation prices have continued their sharp decline. The cost to install solar has dropped by more than 70% since 2010, and prices as of Q4 2018 are at or near their lowest historical level across all market segments.

The solar industry will still prosper without the ITC. However, the planned growth will not be as dynamic. Customers should be aware of the impending changes and plan accordingly, but can still be optimistic about sustained industry growth.

 

 

Sources

SEIA

Bloomberg

Wall Street Journal

Energy.Gov

 

 

2019 Brings Changes to Xcel Energy’s Solar*Rewards Program

Xcel Energy’s popular Solar*Rewards incentive program has undergone a few key changes for 2019. These changes are highlighted by adjusted incentive rates, additional consumer protection provisions, and a new low-income branch of the program.  These changes come only six months after the Minnesota Legislature passed HF 3232, which raised the capacity size limit for Solar*Rewards projects from 20kW to 40kW. You can read about that change here.


Incentive Rate Changes


In 2018 both commercial and residential program participants received $.08 for every kilowatt hour of electricity they produced.  This year, the incentive rates have dropped to $.06 per kWh for commercial participants and $.07 per kWh for residential participants.  While these reduced rates will lower the financial benefit program participants receive, they will allow the total incentive budget to be split among more projects.

 


Consumer Protection Provisions


The Solar*Rewards program now requires every installer submitting a residential application to be a licensed Minnesota Residential Building Contractor.  This aims to help protect customers by ensuring that only qualified installers are using the program.  


The new MN Contractor Recovery Fund was also created with customers in mind. The fund compensates owners or lessees of residential property in Minnesota who have suffered actual and direct out-of-pocket loss due to a licensed contractor’s fraudulent, deceptive or dishonest practices, or failure of performance.


Income Qualified Incentives


This year Xcel Energy has added Income Qualified Incentives into the Solar*Rewards program.  These incentives are only available to customers that meet certain income guidelines and have separate rates for residential, non-profit & multi-family, and solar garden customers.

 


Unlike the traditional Solar*Rewards incentives, the Income Qualified Incentives are structured as an upfront per-watt rebate combined with a production incentive. Xcel has set aside between 10 and 20 percent of the total incentive pool specifically for these projects. With the current budget at just over $9,000,000, at least $900,000 will be set aside for Income Qualified Incentives.