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7 Things to Know About the Solar Tax Credit Extension

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Last week, U.S. lawmakers voted to extend the incentive tax credits (ITC) for solar and wind investments, which were set to expire next December.  

To help distill what the legislation means for U.S. solar investments and the nation’s overall energy landscape, here are 7 things you should know.

1. The extension is for five years.

The new legislation extends the current 30 percent solar ITC for three more years. It will then scale down incrementally through 2021 and remain at 10 percent permanently starting in 2022.

2. It's expected to spur about $40 billion in solar investments.

According to GTM Research, the ITC extension will help drive $130 billion in total investment, with more than $40 billion of investment directly attributable to the passage of the extension.

3. Between 20-100 gigawatts of solar power are projected to be installed. 

According to Bloomberg New Energy Finance (BNEF), the extension will add 20 gigawatts of U.S. solar power – more than all solar panels installed in the U.S. before 2015. GTM Research’s estimates are significantly higher, projecting that the extension will spur nearly 100 gigawatts of solar installations by 2020.

4. The extension underscores how important and cost-effective solar has become.

This year is set to be a record-breaking year for U.S. solar. In 2015, U.S. total installed solar capacity topped 24.1 gigawatts in Q3 – enough to power 5 million U.S. homes. Direct Energy Business played a major part in this trend with a number of innovative solar projects, including a groundbreaking 1.2 megawatt rooftop installation in Texas with H-E-B and SolarCity.

5. Negotiations went down to the wire.  

The legislation was the product of protracted – and procrastinated – negotiations between Democrats and Republicans. In exchange for the multi-year extensions of renewable energy tax credits, Democrats helped lift a 40-year ban on the exportation of U.S. crude oil.  

6. It will help reduce carbon emissions.

While the impact on carbon emissions has been hotly debated thus far, according to the Council on Foreign Relations and number of other analyses, the extension of tax credits will reduce carbon dioxide emissions more than lifting the export ban will increase them.  

7. It will accelerate the nation’s ability to meet its obligations under the Clean Power Plan and the Paris climate agreement.

In August, President Obama unveiled the final version of the Environmental Protection Agency’s (EPA) Clean Power Plan, which targets a 32 percent emissions reduction in the electric power sector — the largest source of carbon pollution in the United States — by 2030.

In the short term, the extension will help incentivize and accelerate the power sector’s shift to more renewable energy resources. By the time the tax credit expires in 2022, solar and wind are projected to be the cheapest forms of new electricity in many U.S. states.

For more information on how your business can take advantage of the incentive tax credit (ITC) for solar systems, check out our Solar page

Posted: December 21, 2015