The passage of H.R. 1424, the Emergency Economic Stabilization Act of 2008, provides critical news for the solar industry at large, but also for regulated electric utilities looking to diversify their energy mix with solar electric generation. In addition to extending the federal solar investment tax credit (ITC) for eight years, the legislation includes the removal of a prohibition that previously prevented electric utilities from taking advantage of the credit.
Based on announcements and discussions with utility executives this year, the Solar Electric Power Association (SEPA) predicts that utilities will quickly become the largest and one of the most important customers for the solar industry, expanding solar markets beyond analysts’ expectations. Access to the federal tax credit will expedite the timeframe and scale to which this happens.
“U.S. electric utilities’ engagement with grid-connected solar electricity has increased significantly in 2008, with major photovoltaic and concentrating solar thermal project announcements totaling more than 5000 MW,” said Julia Hamm, SEPA executive director. “Without the ability to take direct advantage of the ITC, the only viable financial option was to have these plants be owned and operated by independent power producers who then in turn sell the electricity to the utility. The change to the tax credit facilitates utility ownership as another option, which will result in additional projects and innovations.”
With the policy change, utilities that have a tax appetite and an interest in owning solar generation projects now have an added incentive to diversify and clean their energy supply with the addition of solar power.
“This is a very positive development for the utility industry as it will go a long way to putting solar power within reach of many more Americans,” said Jim Rogers, chairman, president and CEO of Duke Energy, a SEPA member. “It is exactly what we need as we explore investing $100 million to install, operate, maintain and dispatch solar panels on our customers' rooftops in North Carolina as a viable option to build a bridge to a low-carbon future.”
“The extension of the tax credit also significantly increases the likelihood that recently announced solar projects will come to fruition,” says Hamm. For example, the largest planned photovoltaic projects in history – one for 550 MW and the other for 250 MW – announced as long term contracts with private solar companies in August by Pacific Gas and Electric Company, were both contingent upon the extension of the federal investment tax credit.
The full list of the solar investment tax credit provisions in H.R. 1424 include:
- Extension for 8 years of the 30-percent tax credit for both residential and commercial solar installations
- Elimination of the $2,000 monetary cap for residential solar electric installations, creating a true 30-percent tax credit (effective for property placed in service after December 31, 2008)
- Elimination of the prohibition on utilities from benefiting from the credit
- Allowance for Alternative Minimum Tax (AMT) filers, both businesses and individuals, to take the credit
- Authorization of $800 million for clean energy bonds for renewable energy generating facilities, including solar