Firm: Tax credit extension should 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, should result in 25 GW of additional solar capacity over the next five years – or 54% more than a no-extension scenario, according to GTM Research.

GTM, which is a division of Greentech Media, released its preliminary updated forecast Dec. 16 based on the current omnibus language, ITC extension will foster $40bn in incremental investment in solar between 2016 and 2020.

GTM does much research for the Solar Energy Industries Association (SEIA).

House leaders have agreed to the parameters of a $1.1 trillion omnibus spending plan, which among many other things, includes “tax extenders” for key solar and wind energy tax credits along with a lifting of a decades-old ban on U.S. crude oil exports. It is being widely predicted that the package will win approval by both the House and Senate.

The package has been endorsed by many energy groups, although one taxpayer group said the spending plan included too much “corporate welfare.”

GTM Research has done much study on United States photovoltaic (PV) installations with and without ITC extensions through 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% through 2020.

“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% impact versus no extension, while commercial solar will increase by 51%.

In the absence of this legislation, the ITC would drop from its current 30% to 10% (for non-residential and third-party owned residential systems) and to 0% (for host-owned residential systems) on Jan. 1, 2017. Instead, if the omnibus spending bill is passed in its current form, the ITC would step down according to this schedule:

The bill also includes a “commence construction” provision, allowing projects to come on-line by the end of 2023 and still qualify for larger credits.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.