The Solar ITC to Take its First Step Down, While Rapid Shutdown Moves Forward

The 2017 National Electrical Code (NEC) and the federal solar investment tax credit (ITC) will leave their mark on the solar industry in 2019, with the NEC increasing costs temporarily and the ITC lowering incentives.

That’s the word from Ryan Mayfield and Randy Batchelor, instructors of HeatSpring’s Megawatt Design course, which focuses on designing large-scale commercial solar systems, in the 1- to 5-MW range.

The Full Solar ITC is Available Until End of 2019

System designers and installers have until the end of the year to take advantage of the full 30 percent solar ITC, says Mayfield.  Next year, the ITC drops to 26 percent of eligible costs. That means there will be increased installation activity this year as installers rush to complete projects in time to meet the Dec. 31 deadline, Mayfield says.

The ITC drops to 26 percent for projects that begin construction in 2020 and 22 percent for projects that begin in 2021. After 2021, the residential solar ITC will drop to zero. Meanwhile, the commercial and utility credit will drop to a permanent 10 percent, according to the Solar Energy Industries Assoc.

“Things are getting busier; my clients are trying to move projects earlier,” says Mayfield, president of Mayfield Renewables.

Solar Industry will be Fine Without the ITC

“I think the fact that the ITC is going away is probably a good thing for the solar industry,” says Batchelor, owner of Sol Rebel. “I don’t say that lightly; the cost of solar is low enough so we should be fine without the ITC.” As the ITC phases out, the industry will need to continue to install solar systems as efficiently and cost-effectively as possible even as equipment costs, which have been dropping for many years now, stabilize. That means contractors must increasingly focus on operational efficiency by constantly improving engineering and construction practices, he says. 

Meanwhile, the 2017 NEC’s new rapid shutdown requirement took effect Jan.1 in many states–including Oregon, Missouri and Washington–and calls for solar installers and designers to include equipment that shuts down a solar system at the module level, says Mayfield.

The Challenges of Rapid Shutdown

The rapid shutdown requirements can limit a designer’s product choices, he says, noting that the requirements aren’t in effect in California because the state is not yet operating under the 2017 code.

To meet the new requirement calling for shutdown at the module level, electronic equipment must be installed at each module that reduces voltages inside the module to levels that are safe for firefighters.

“Previously we were able to wire up our modules and put some kind of control device outside the array. This was readily available and doable. The device shut it down,” explains Mayfield.

However, the only way to meet the new rapid shutdown requirement is to install an electronic device at each module–with limited options available right now for doing this, Mayfield explains.

The Need for New Products

“There are relatively few products that meet the code requirements and that are somewhat tested and that people are confident about,” he says. “For us, it means increased costs.” However, he’s confident that new products will become available and costs will come down.

In spite of these new requirements–and thanks in part to the ITC–the solar industry is expected to have a good year, says Batchelor.

“Rapid shutdown for rooftop systems will add a little cost in the short term; that’s additional hardware you have to put on the project. But the cost of that equipment should come down rapidly,” says Batchelor. “And this year will be a good year because of the ITC going down. The fact that it is expiring will drive growth.”