Good News - Solar Tax Credits Extended
Congress Passes Spending Bill With Solar, Wind Tax Credit Extensions and Energy R&D Package
Solar tax credit impacts
Many of the large-scale solar development set to be completed through 2023 have used "safe-harbor" provisions to secure the original 30 percent ITC credit, removing the risk of seeing project financing disrupted by a reduction in the tax credits, Manghani noted.
But a two-year extension is “a much better outcome than the industry had expected,” Manghani said. It will provide significant upside to solar growth in 2022 through 2025, as more projects can secure the 26 percent and 22 percent credits through "commence-construction" or "safe-harboring" provisions by 2023.
What’s more, the bill “provides the industry a full extra year to negotiate longer-term tax credits or tie renewables directly with future carbon policies with the friendly Biden administration,” Manghani noted. Utility-scale solar power is already cost-competitive against coal-fired power across the world and with natural-gas-fired power in many markets.
The lack of a direct-pay provision "may be a bit disappointing for the smaller solar developer shops that have had a tough time securing tax equity capital in the pandemic-induced [economic contraction],” Manghani conceded. But, he added, “all in all, the industry will reflect on this outcome as a glass three-quarters full.”