The 2020 election season is upon us and federal solar energy policy is on many peoples’ minds. It’s that time of year when most politicians discuss, dispute and distract. If you’re like me, you can easily get lost in all of the chaos of it all. Luckily, I’m here to help shed some sunlight on the issues facing the renewable energy sector. Let’s dig into four topics that you need to understand to make informed decisions.

INVESTMENT TAX CREDIT

Over the past decade, the solar investment tax credit (ITC) has been one of the most important solar energy policy tools to help support the growth of the solar industry in the United States. In 2015, Congress passed a multi-year extension of the ITC, allowing customers to receive a 30% tax credit on solar installations. In late 2019, Congress failed to pass another extension of the ITC, meaning that the ITC will phase out over the next few years. In 2020, the ITC has dropped to 26% and will drop to 22% in 2021. In 2022, it will be completely phased out of residential installations. Commercial and utility installations, however, will continue to get a 10% tax credit.

Here’s how the solar ITC works. The residential ITC allows the homeowner to apply the current 26% ITC to their personal income taxes. This credit is applied when a homeowner purchases a solar system and has it installed on their residence. This tax credit is then a dollar-for-dollar reduction in the income taxes that that person would otherwise pay the federal government during tax season. The dollar amount of the ITC is based on the amount of money invested in solar property, which is just a fancy way of saying the size of the owner’s system. If a homeowner buys a home with a newly installed system and owns the solar system outright, the customer is eligible for the ITC the year that they moved into that property. If the homeowner leases the system or purchases the energy produced from the system through a power purchase agreement (PPA), the ITC is claimed by the company that leased the system or offered the PPA. 

At the end of 2019 as the 30% ITC was about to decline to 26%, customers rushed to take advantage of the higher tax credit. Solar installers saw a sharp spike in system orders. As the ITC continues to shrink, more customers will join in the movement to solar energy. It’s not just beneficial to the planet; it’s also the best way to maximize your energy savings.

If you’re thinking about going solar, now is the time. Waiting to install solar until a new administration takes over in Washington is a risky bet. The solar industry is not guaranteed any more tax breaks. Don’t depend on unpredictable political horse trading. Go solar this year and lock in the tax benefits.

SOLAR TARIFFS

The tariffs on imported solar panels are a controversial solar energy policy implemented by the Trump administration that has brought a mixed bag of results. The policy was designed to encourage solar panel manufacturing in the United States, instead of importing panels and cells from abroad. These tariffs were first approved in 2018 and currently stand at 20%, which almost offsets the current 26% solar ITC. Moving forward, the tariffs are slated to drop to 15% in 2021 and, hopefully, will end in 2022. Until then, solar panels that have been tariffed will keep prices higher as these costs get passed on to customers.

In 2019, the United States International Trade Commission came out with a report detailing the effects of the tariffs on the solar industry. According to Abigail Ross Hopper, president and CEO of SEIA, “While the solar tariffs have resulted in some new US manufacturing investments, total domestic cell and module capacity falls short of demand. The tariffs have effectively constrained solar development in the United States” (Solar Power World). Unless the tariff gets updated, expect continued taxes to prolong inflated prices of imported solar panels in the United States.

AMERICAN ENERGY INNOVATION ACT

This is a bipartisan bill that was introduced in the United States Senate by Senator Lisa Murkowski, R – Alaska, and Senator Joe Manchin, D –  West Virginia. Senator Murkowski called it, “our best chance to modernize our nation’s energy policies in more than 12 years” (GreenTech Media). The bill contains hundreds of millions of dollars to be distributed over the coming years to boost research and development of solar and wind power, energy storage, smart grid, electric vehicles (EV) and other clean technologies.

 The bill, however, is expected to draw opposition from Democrats as it lacks targets for reducing carbon emissions, and has no enforcement mandate. The bill also has provisions for fossil fuels and mining that make further support from Democrats seeking a national policy to combat climate change less likely. Nor does the bill include any extension on the ITC. Senate Minority Leader Charles E. Schumer, D – New York, plans to seek amendments to the new energy bill to extend these credits.

THE GREEN NEW DEAL

The Green New Deal is an aggressive proposal to address climate change, justice and equity. It is supported by presidential candidate Senator Bernie Sanders, D – Vermont. One of the main goals of the Green New Deal is to transform our energy system to 100% renewable energy while creating 20 million jobs to combat the climate crisis. The plan also calls for a just transition for communities and workers, including fossil fuel workers. This means training workers from the coal industry for jobs in renewable energy at a pay grade comparable to what they are currently earning.

The Green New Deal also addresses the role that the fossil fuel industry has played in the decades long damage to the environment, and aims to hold them accountable. This includes a ban on fracking and ending subsidies for the fossil fuel industry. On the flip side, the plan calls for investing in conservation and public lands to heal our soils, forests and prairies. The plan also calls for the United States to rejoin the Paris Agreement, even though certain states have taken action to meet the goals from the Paris Agreement in their own way.

Knowing federal solar energy policy is important to make informed decisions on investments in renewable energy. As technology continues to develop and deployment expands, the transition to a cleaner future powered by renewable energy looks brighter every day. What we do now will affect the world we leave behind for future generations.

Written by Davey Newlove