The solar industry is lobbying for measures to move solar energy forward during the ongoing pandemic and financial crisis–measures that could help bring solar to more people in the U.S., boost the economy and help meet greenhouse gas reduction goals.
The industry hopes Congress, in its efforts to create a new stimulus package, will pass some form of a solar tax incentive, says Christopher Lord, instructor of HeatSpring’s Solar Finance Professional Certificate training program. It may be included in a stimulus package in August, or it may be rolled out in December.
Creating Jobs and a Greener Future
“Solar is an absolutely wonderful way to not only create jobs and opportunities for people, but it also lays the groundwork for a greener future, which is beneficial relative to greenhouse gases and global warming,” he says.
The industry is considering a number of proposals. They are related to the federal solar investment tax credit (ITC), which is stepping down from the 30% credit in 2019 to 26% in 2020, 22% in 2021 and 10% in 2022 for commercial and industrial projects.
Solar Incentives That Benefit Companies with Low Tax Appetites
The challenge is creating incentives that benefit companies whose income has dropped due to the coronavirus. That means they have low tax appetites.
In order to boost the growth of solar, Congress must find a way to either increase companies’ tax appetites or make it easier to obtain the benefits of tax credits, given that many companies aren’t in a financial position to take advantage of them, says Lord.
Options Related to the Solar ITC
One option is to reinstate the 30% tax credit. Another is to provide cash grants similar to the program implemented in 2008, under which solar investors with small tax appetites received cash back instead of the ITC. This was an alternative to the ITC under which project owners applied to the U.S. Treasury for cash payments instead of tax credits. While that effort provided many benefits, some people gamed the system, Lord notes.
Lord favors an ITC refund.
“Some proposals before Congress include a refundable tax credit type of mechanism. Under this type of proposal, if after you pay taxes the first year, it turns out you have an excess tax credit, you could apply to the U.S. Treasury for a refund. They would refund you the difference in cash,” he explains.
Most ITC refund proposals call for a refund of a portion of the tax credit. For example, if a company had $100 of left-over tax credits, the company would apply for a refund and get $85 back. Hawaii has a program like this in place.
Democratizing Solar Energy by Enabling More People to Acquire It
Such an ITC refund would help “democratize” solar energy by enabling more people–not just those with high incomes–to acquire solar energy, says Lord.
“The ITC benefit is a little less valuable as a refundable tax credit, but opens up the market to more investors.”
This type of solar job stimulus program is a twofer, says Lord.
“You can create opportunities for businesses while at the same time greening the economy. I think Republicans are often supportive of infrastructure projects like this that provide benefits and value.”
Stimulus Package Could Help Move U.S. Toward Electrification
A solar stimulus program would also help meet the need for a huge increase in wind and solar, given state regulators’ efforts to move toward electrification. With electrification, the existing infrastructure of wind and solar would need to be doubled, Lord says.
He believes that by the end of the year, Congress will pass a general economic stimulus package and that green infrastructure will be a logical part of it.
Coronavirus has Changed People’s Focus
The coronavirus has not only created a need for such a stimulus package, says Lord. It has changed how people commute, where they live and how they work. He believes it has spurred people to focus more on how to create a better environment.
“With all of this, and a return to prosperity, we could make huge progress in the 2020s. Our daughters and sons, if we’re lucky, will be the ones who save the world,” he says.
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