Santa came early for the solar, wind and other renewable energy industries today as Congress passed legislation right before it closed down for the holidays that would extend tax credits that were on the verge of expiring.
The credit extension came at the behest of industry representatives concerned about the impact of their expiration. The will keep momentum going for solar, the largest beneficiary, which is already seeing boom times into 2016.
Solar currently enjoys a 30 percent Investment Tax Credit (ITC) that was to set to start expiring incrementally at the end of 2016. The ITC has been credited with having spurred a solar boon that will see 1.3 gigawatts deployed in the U.S. in the third quarter of this year alone, according to GTM Research. This is twice that of Q3 2014 and a 46% increase over Q2 2015.
Solar stands to benefit the most from the extended tax credits. It is already enjoying a boom that has seen 1.3 gigawatts deployed in the U.S. in the third quarter alone.
IHS Research, which initially had projected solar deployment in the U.S. to approach 17 GW in 2016, before falling to 6.5 GW in 2017, when the ITC started to expire, has revised its 2017 figure upward, anticipating the extension. Now it expects 2017 to realize deployments of between 13 and 16 GW. It expects a peak in 2020 and 2023, based on the new ITC rules.
Under the new legislation, the 30% ITC will now be extended by three years, and then start ramping down incrementally through 2021 at which point it will be set permanently at 10%.
Wind energy will see its 2.3-cent Production Tax Credit extended through next year and projects that begin construction in 2017 will see a 20 percent reduction in the incentive, according to GTM. “Also included were geothermal, landfill gas, marine energy and incremental hydro, which will each get a one-year PTC extension. Those technologies will also qualify for a 30 percent ITC, if developers choose. In addition, the bill expanded grants for energy and water efficiency.”
The extensions will have an impact up and down the supply chain for renewables, from power converters, switches, inverters, battery storage, IGBTs, power MOSFETs, optocouplers, digital isolators, to photovoltaic cell suppliers, turbine manufacturers, small and large installers, and power monitoring equipment. It runs the gamut.
“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,” said MJ Shiao, GTM’s director of solar research.
Happy Holidays indeed!
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