ITC Credits Extended

In December 2015, President Obama signed a $1.1 trillion appropriations bill that will extend investment tax credits (ITC) for solar and wind businesses and industries in the U.S.

In particular, areas of the Southeast and Midwest are projected to mature in solar and in Texas, wind. This important development is expected to build significant momentum in the way the country presently approaches renewable energy.

Under this new law, existing 30 percent ITCs for solar will extend by three years. Provided construction starts prior to 2020 and service begins within 2 years, 30 percent of this investment will be returned. Any construction that begins in 2020 receives a 26 percent credit. In the two years that follow, the ITC will reduce incrementally.

Impacts for Wind Projects

This new legislation also states that the incentive is reduced by 20 percent for any wind project starting in 2017. The credit will expire in 2020 and will decrease 20 percent per year until the end date is reached. A 2.3 percent production tax credit will also be extended through 2016.

A one-year extension of the production tax credit will apply to geothermal, landfill gas, incremental hydro and marine energy. These will also qualify for a 30 percent ITC.

Impacts for Solar Projects

The potential impacts of the ITC extension on solar is particularly favorable to the industry and the environment. By 2020, experts predict an increase of 54 percent or 25 GW of solar capacity above what is produced now. The installation costs of solar alone could fall 40 percent.

The extension will also provide approximately $130 billion total in investments. This will help to grow 100 cumulative GWs by 2020, and increase solar panel installation by more than half. From 2016 to 2020, the ITC extension will help to significantly increase residential installations by an estimated 35 percent and non-residential installations by 51 percent.

Over the next two years it is expected that contracts will sit at 4 cents/KWh. With continued declines in cost for both solar and wind, both energies are expected to reach the cheapest available kilowatt-hours by 2020. This means both solar and wind energies are likely to top the cheapest form of new electricity across the country.