Solar ITC Extended, Huge Public Market Investment in Solar: What it Means for 2021

The solar industry’s year ended with good news for 2021, and other positive headlines may be coming. Not only did the industry see high public market investment in 2020. The solar Investment Tax Credit (ITC) was extended. 

“The solar industry looks fantastic,” says Sean White, instructor of HeatSpring’s  58-Hour  NABCEP Advanced PV certification Training and PV Associate Exam Prep, which covers the ITC.

On December 21, both houses of the U.S. Congress passed a federal spending package that included a two-year extension of the solar ITC, as well as additional funding for research and development. 

The ITC is a credit that can be used for paying taxes. For a $1 million solar project, the ITC lowers taxes by $260,000. “It is way better than a deduction!” says White.

Twenty-Six Percent ITC Extended for Two Years

The legislation called for the solar ITC to remain at 26% for projects that begin construction in 2021 or 2022. It will step down to 22% in 2023 and 10% in 2024 for commercial projects, and will remain at 10% for commercial projects. The residential credit will end in 2024. Without the extension, the ITC would have dropped to 22% in 2021.

“A 30% ITC would have been nicer, but it seems that everyone is excited about 26%,”  says White, the author of numerous books about solar. In the first year of the ITC, the benefit was 30%.

The legislation includes an energy innovation bill that provides research and development grants for clean energy technologies, including solar and storage.

Wind and Solar Provide Backbone of U.S. Electricity Growth

The American Clean Power Association (ACPA) https://www.awea.org/resources/news/2020/american-clean-power-association-statement-on-rene  said, “As we enter the new year, stable policy support will help ensure that wind and solar can continue providing the backbone of our country’s electricity growth.”

Included in the package is five years of U.S. Department of Energy (DOE) research and development funding for clean energy technologies, including $1.5 billion for solar power, $625 million for wind power and $1.08 billion for energy storage. 

Will Solar Tariffs be Eliminated?

In addition to the legislation, White is expecting the Biden administration to eliminate tariffs imposed by the Trump administration on imported solar modules and cells.

“Under the Trump tariffs, we are paying twice what people in other countries are paying per watt for solar. I think the Biden administration is going to get rid of these tariffs so we can buy PV for the same price as people in other countries,” says White.

The Biden victory is not the only reason for the solar industry’s positive outlook in 2021. Nonpartisan politics also play an important role. 

“Tax cuts and tax credits for renewable energy are very popular for all political parties because everybody likes to pay less and everybody likes renewable energy,” says White. 

Public Market Investment in Solar

Public market investment in solar boomed in 2020. The publicly traded Exchange Traded Fund (ETF) Invesco Solar ETF (Ticker $TAN),  a fund that tracks the general performance of the solar industry by owning portions of various solar companies, saw its price increase by more than 235 percent. 

“I am all for a solar ETF,” says White. “It goes to show you how positive the outlook is for the industry and why solar education is so important, even for ETF managers.” 

With solar investment soaring, and solar garnering bipartisan government support, 2021 is expected to be a good year for the industry.

But the extension of the ITC may mean that people don’t move as quickly on projects, warns Christopher Lord, instructor of HeatSpring’s Solar Executive MBA Training course

A Great Time to Put Solar on Roof

“It’s a great time to put solar on the roof,” says Lord. “At the same time, people are being very cautious because cash flows are reduced due to the pandemic. The ITC extension is two years.”

Those two years will pass quickly, he says. “It’s important to stay focused on customers.”