Thoughts on Solar

Ok, so of course it took some last minute drama - this is 2020 after all - but the extension to the federal tax credit for solar and storage has been signed into law!  Read on to see what that means for you!

State of the Law Going into Deliberations

This new project will get the full 26% tax credit next year!

As readers of this blog would surely know, the federal tax credit that had been set at 30% for several years, dropped down to 26% in 2020 (just the first of many not-so-desirable outcomes for a year that would see so many!), and was scheduled to decline to 22% for 2021, before expiring completely in January of 2022 for residential solar projects. 

We have written before that the solar tax credit was quite popular on both sides of the aisle, so there was always some hope that the current credit rates might be extended, but that was by no means a sure thing.  Fingers crossed and all that!

A Bill is Born!

As the negotiations between the Trump Administration and Congressional leaders progressed to try and provide economic stimulus at a time when many are out of work, too many facing potential evictions, and state and local governments facing severe challenges, word came out from CALSSA that the extension of the tax credit was in the draft bill!  Then on December 21st we learned that the extension was in the final bill that was being sent to the President!  (For those who are true gluttons for punishment, here’s a link to the Bill, and the language for the residential extension is on page 4,915!  Crazy, right?)

Excited by this most welcome development at the end of a dark year - and just in time for Christmas! - I was ready to write this blog.  But hey, this is still 2020, so I resolved to keep my powder dry until the Bill had actually been signed!

Drama

Seems my hesitation was warranted, as the President declared the Bill - negotiated by his Administration - a “disgrace” and threatened to veto it!  Instead insisting that the relief payments be substantially increased (something his own party rejected) and the “pork” in the bill be removed.  (News coverage of the President’s displeasure focused on exemptions for “three-martini lunches” (who is doing that these days?) or depreciation schedules for race horses!  The solar tax credit did not seem to be part of the pork in question.)  Of course, one man’s pork is another man’s livelihood, and besides, you cannot really take an agreement that took literally months to hammer together and then redo it in days.  Didn’t the President ever see, “I’m Just a Bill?”

All’s Well that End’s Well

So after much Sturm und Drang, on Sunday the Bill became a Law!  Which means we can tell you exactly how things will progress going forward on the tax credit front:

The 26% credit will now continue for projects “placed in service” between now and the end of 2022.  The 22% credit will apply to projects placed in service between January 1, 2023 and December 31, 2023.  Projects that go into service after January 1, 2024 will receive no credit under this new law.

Given the stimulus value of solar and storage projects - to say nothing of their environmental benefits - this is a most welcome development.  And for projects that got delayed due to the pandemic, the full 26% credit will still be available next year - a relief to many homeowners and solar installers who have been up against the clock.

In the end, the process was messier than it needed to be, but the job got done.  Here’s hoping that 2021 and 2022 can be real boom years for the solar industry, and the broader economy as well!