Investment Tax Credit Extension Would Increase Solar Installations 54% Through 2020
A five-year extension to the solar investment tax credit (ITC), which is currently included in the omnibus spending bill under consideration in Congress, would result in 25 gigawatts (GW) of additional solar capacity over the next five years — a 54 percent increase over a no-extension scenario. According to GTM Research, which released preliminary updated state- and segment-level forecasts based on the current omnibus language, ITC extension will foster $40 billion in incremental investment in solar between 2016 and 2020.
"The ITC extension currently written into the omnibus spending bill will result in a 20 gigawatt annual solar market in the U.S. by 2020," said Shayle Kann, Senior Vice President at GTM Research. "At that rate, more solar will be installed each year than was added to the grid cumulatively through 2014"
The impact will be most pronounced in the utility-scale sector, where ITC extension will increase deployments 73 percent through 2020.
Comments by Benjamin Airth, CSE senior project manager for renewables:
“On the heels of COP 21 and the landmark greenhouse gas reduction agreement, Congress is sending a message to America that they support solar and renewable energy. Stakeholders in solar markets across this nation have more assurance their hard work will continue to develop job growth, create energy savings for homeowners and businesses, and continue to decarbonize our electric system.
“Two key decisions in California this week support the intentions of Congress. The California Public Utilities Commission decided to extend net energy metering for the state’s solar energy customers and the City of San Diego committed to receiving 100% of its energy from renewable sources by 2035.”
“Given price trends in the utility solar sector, the five-year ITC extension will likely result in utility-scale solar contracts being signed for less than 4 cents per kilowatt-hour regularly over the next two years,” said Cory Honeyman, Senior Analyst at GTM Research.
In the distributed solar market, residential installations will see a 35 percent impact versus no extension, while commercial solar will increase by 51 percent.
In the absence of this legislation, the ITC would drop from its current 30 percent to 10 percent (for nonresidential and third-party owned residential systems) and to 0 percent (for host-owned residential systems) on January 1, 2017. Instead, if the omnibus spending bill is passed in its current form, the ITC would step down according to this schedule:
- 2017-2019: 30%
- 2020: 26%
- 2021: 22%
- 2022+: 10% (non-residential and third-party owned residential) or 0% (host-owned residential)
The bill also includes a “commence construction” provision, allowing projects to come online by the end of 2023 and still qualify for larger credits.