Solar industry supports legislation to treble solar tax credit

WASHINGTON, DC, US, June 1, 2005 (Refocus Weekly)

The U.S. solar industry wants government to approve a tax credit for residential customers for the first time in 20 years.

Senate bill 727, introduced by republican senator Lamar Alexander of Tennessee and democratic senator Tim Johnson of South Dakota, would increase the existing investment tax credit for solar to 30% from 10% over five years. The legislative proposal would cut the cost of solar power by half, create 50,000 new jobs, and save consumers more than US$15 billion on electricity and natural gas bills over the next decade, according to the Solar Energy Industries Association.

“Historically, solar prices have come down 20% for each doubling of installed capacity,” says SEIA chair Christopher O’Brien, who is also vice-president with Sharp Electronics’ Solar Systems Division. “A usable investment tax credit would jumpstart the market by bringing already-declining solar costs over the tipping point in many areas. If we seek to achieve significant near-term deployment and lower solar costs, the most important policy change that Congress could enact would be an expansion of the ITC.”

Solar systems in both residential and commercial installations would be eligible for the credit, he told the House Ways & Means Select Revenue Subcommittee. The solar industry in the United States has not had a tax credit for residential customers in 20 years.

The subcommittee is evaluating a clause in Section 45 of the Internal Revenue Code which allows owners of green power facilities to claim a tax credit for electricity generation, but that tax credit holds no value for distributed (retail) or central station (wholesale) solar power, O’Brien explained. For different reasons, the production tax credit under Section 45 has “insignificant value to the solar industry.”

“Most solar PV and solar thermal projects are distributed generation, installed on rooftops of homes and businesses, and the energy generated by these solar energy systems is used on site,” he explained. “The definition of a power sale used by the legislation therefore excludes distributed solar energy systems from the credit.”

Under current law, larger utility-scale solar plants developers must choose between the production tax credit in Section 45 and the existing solar investment credit in Section 48, and they are unlikely to claim the Section 45 credit because Section 48 is “more significant in value.”

“The most effective way to bring solar energy on-line in the United States would be to increase the existing Section 48 solar investment tax credit to 30% and make that credit available for all solar applications, even if that credit were to come at the expense of our being excluded from the Section 45 PTC,” he said. “Congress has used investment tax credits for the last 40 years as a mechanism to support key emerging industries and to realize public value,” and solar provides “excellent public value.”

“We have an opportunity to shift a tax policy that does not work into one that does,” he said. “From Maine to Nevada, we could use solar power to meet some of our most pressing energy concerns - from peak demand reduction, to environmental benefits, to the avoidance of transmission and distribution upgrades. Expanding the ITC would give the solar industry a credit of approximately the same value as that currently enjoyed by other renewables through the PTC, and begin to bring the booming solar market back to the United States.”

“Meaningful incentives are key to bringing down the cost of solar energy” and he recommended that solar be removed from list of eligible technologies under Section 45 in exchange for an expansion of the existing Section 48 investment tax credit.

Expansion of the ITC over ten years in the state of California would create 10,000 jobs and spur $8.5 billion dollars in economic investment. “In other nations, similar policy models have been used to spur manufacturing scale-up, increased competition among installers, and improved marketing,” he said. “This international market growth has cut the cost of solar energy sharply, and demonstrated the ability of the industry to move off of incentives after that initial jumpstart.”

SEIA is the U.S. solar energy trade association, representing 100 companies that manufacture and sell solar systems in photovoltaics, solar thermal and concentrating solar power.

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