The Solar Investment Tax Credit (ITC) has had a long and winding road. Launched in 2005 with an original expiration date of 2007, Congress has since renewed this immensely popular policy multiple times.
Set to expire at the end of 2020, Congress once again passed an extension for the solar ITC late last year. The legislation was part of the COVID-19 relief package and omnibus spending bill voted on in December 2020.
The passing of this bill means customers that purchase new residential and commercial PV modules can still deduct 26 percent of the cost of the system from their taxes.
The deduction percentage drops to 22 percent for projects that begin construction by the end of 2023. In 2024 and beyond, large-scale solar projects will still receive a 10 percent credit that will not apply to small-scale solar projects.
The two-year extension is a big win for the solar industry and will help boost solar growth significantly during the next couple of years. This is also great news for residential installers and C&I EPCs and developers.
The ITC extension provides a major selling point for customers. It will allow homeowners and project stakeholders the opportunity to speed up their return on investments and add more value to projects and portfolios. There are also routes that developers and EPCs can take for safe harboring the tax incentive for future projects.
Calls grow for bifacial tariff repeal
While the extension of the ITC bodes well for solar, another federal policy has drawn the attention of the solar sector: the Section 201 tariffs. The uncertainty and higher costs from the tariffs have stifled solar installations across the country and demands are growing for their repeal.
Implemented in 2018, Section 201 first imposed a 30 percent tariff on imported solar modules. They dropped to 20 percent in 2020 and were scheduled to fall to 15 percent in 2021. However, in late 2020, the previous administration issued a last-minute proclamation that raised the tariffs to 18 percent. The move also removed the exemption for bifacial solar panels and put a 20 percent tariff on them.
Now, the solar sector calls are growing for the new administration to repeal the proclamation and bring the tariffs back to the status quo.
In a statement, Abigail Ross Hopper, president and CEO of the SEIA, said, “Billions of dollars’ worth of solar contracts are now at risk because of the October 10 proclamation. The president has the opportunity to build a clean energy economy with millions of well-paying jobs, strengthen our nation’s infrastructure, bolster domestic manufacturing, and uplift communities across America. Removing the tariffs is the first step to achieving this vision.”
There’s plenty of optimism that the new administration will go this route. The president has already signed several Executive Orders (EOs) aimed at carbon reduction and climate action. Additionally, the president set a 2035 target for the U.S. to achieve 100 percent carbon-free electricity generation. Reaching this ambitious goal would necessitate a much larger and more robust role for renewable energy deployment around the country.
Repealing the proclamation would be further good news for the sector along with the solar ITC opening the door for more residential and commercial opportunities.
In light of the tax incentive extension and the potential for changes to solar tariffs, EPCs and developers need a solar partner they can rely on.
Reach out to the solar experts at Trina Solar to learn more about the great new opportunities available for residential and commercial solar.
(Ed. note: The statements in this article should not be construed as professional tax advice, and consumers and business owners should consult with their tax professionals.)
UPDATE: The Biden administration upheld former President Trump’s decision to remove the bifacial solar tariff exemption.
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