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The Solar Energy Industry Will Thrive Even as Federal Tax Credit Declines

Update: The Inflation Reduction Act of 2022 extended the federal solar tax credit. It will remain at 30% through 2032. Learn more here.  

Publish Date: December 19th, 2019

After a long battle consisting of dozens of meetings, lobbying efforts, and trips to Washington D.C., the solar investment tax credit was removed from the tax extender package to the disappointment of many in the solar industry. The federal solar tax credit (part of the Residential Renewable Energy Tax Credit) has offered 30% off home and commercial solar installations for the past 13 years, but a scheduled step down will start in 2020 when the credit will drop to 26%. An extension to the tax credit, also known as the ITC, would have maintained the full 30% tax credit for another year.

“We are disappointed to report this morning that at the last minute, negotiators cut a one-year extension of the ITC out of the tax extenders package,” Abigail Ross Hopper, President & CEO of Solar Energy Industries Association (SEIA), wrote in a Dec. 19 email to SEIA members. “While this is hardly the outcome we were hoping for, and my team and I are deeply disappointed, we knew from the start that it was a tough fight and I am proud of the fight we brought.”

The industry kept thriving

While the results of the solar ITC are disappointing, this is by no means the first time the solar industry has faced challenges many thought would be the beginning of the end. However, with resilience and malleability, the solar industry has proved time and time again that it’s not going anywhere.

In fact, 20 states have already reached grid parity, which is when the cost of alternative energy levels equal out to less than or equal to the cost of a power from the grid. The number of states that have hit grid parity is expected to reach 42 by 2020.

Let’s look back at the different times throughout the last decade when the solar industry faced what people thought could be an insurmountable mountain and “kept thriving,” as Namaste Solar Co-Owner and CEO Jason Sharpe likes to say:

  • 2008: Xcel Energy gave notice that the initial rebate of $4.50/watt would drop to $3.50. We had no idea what the impact of this rebate drop would be on the fledgling solar industry in Colorado. This insecurity resulted in panic, and there even was a run on the bank. Despite an uncertain future, the industry kept thriving.
  • 2011: On February 16, Xcel announced they would close their home solar incentive program. The closure of the program was unexpected and fast. The industry faced uncertainty as there was no information about whether the program would reopen. In the end, the program was closed for five weeks. That time period proved to be one of the most challenging and impactful events in the Colorado solar industry and in Namaste Solar history. Many of our fellow Colorado solar companies couldn’t weather the storm and went out of business. But the industry kept thriving.
  • 2015: As 2016 approached, solar industry professionals anticipated the scheduled end of the 30% federal solar tax credit, but in December 2015 Congress passed a last-minute extension. This allowed the program to run until 2022, at which point it will roll back to 10% for commercial and 0% for residential. And so, the industry kept thriving.

A look toward the future

At this junction, with the solar ITC just removed from the tax extension bill, we don’t know what the future will bring, but we are confident the solar industry will continue to thrive.

“This decision doesn’t feel super stressful from my perspective. While it would be great to have had this extended, we have seen it coming and we have visibility going forward,” said Namaste Solar Co-Owner and General Manager David Henry. “The strength of the industry is its ability to adapt. And in the very near future, customers should to act to maximize the ITC they can receive in 2020.”

David was part of a crew of solar industry representatives of Amicus Solar Cooperative members that traveled to Washington D.C. in November to lobby for an extension to the federal solar tax credit.

 “I think it’ll look different and there might be some slow down, but at the end of the day we have planned for it,” said David. “It might be more detrimental to some markets more than others, but solar is here to stay.”

With or without the tax credit, solar is a great investment for homeowners and commercial property owners, and that’s why the industry will continue to move forward. Dedicated solar professionals who have come up in the industry through the recent boom are invested in continuing to help folks save money and make a difference with solar.


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