Last year's Energy Policy Act of 2005 provided a 30% tax credit for solar
systems purchased for both residential and business applications. However,
these credits will expire next year without legislative remedy, a term too
short to encourage significant industry growth say many experts and
industry representatives. A long-term extension, they say, is essential to
reducing the cost of solar energy, as it would create market conditions
that allow solar companies to make investments and drive down costs
through economies of scale.
Though the bill is unlikely to pass through the legislative process
without modification, high gasoline prices, environmental concerns, and a
growing awareness of the looming worldwide energy crisis have created a
political atmosphere in which renewable energy initiatives are attractive
to lawmakers, said Rhone Resch, President of the Solar Energy Industries
Association (SEIA). An eight-year extension of the original two-year solar
credit, which was enacted by the Energy Policy Act of 2005, will have a
pervasive effect on the U.S. solar market, said Resch.
"An eight-year extension will allow the U.S. to reclaim leadership as the
number-one market for photovoltaics, and I think it would allow us to be
competitive in solar thermal. It would also, without question, solidify
the U.S. as the biggest marketplace for concentrating solar," said Resch.
The bill was introduced in both the House of Representatives and the
Senate (H.R. 5206 and S. 2677, respectively). The main sponsors are
Senators Gordon Smith (R-Oregon) and Robert Menendez (D-NJ), as well as
Reps. J.D. Hayworth (R-AZ) and Michael McNulty (D-NY). Numerous other
lawmakers agreed to co-sponsor the bill, bringing the total support up to
nine Senators and 23 Representatives. The House and Senate bills include
the following provisions:
Residential Solar Tax Credit: Extends a 30-percent tax credit,
created in the Energy Policy Act of 2005, for the purchase of residential
solar water heating, photovoltaic equipment, and fuel cell property.
Changes the maximum credit to $2,000 for each kilowatt of capacity for
solar equipment and $1,000 for each kilowatt of capacity for fuel cells.
Credits may be taken against the alternative minimum tax. Expires after
December 31, 2015.
Business Solar Tax Credit and Fuel Cell Tax Credit: Extends a
30-percent business credit, established in the Energy Policy Act of 2005,
for the purchase of fuel cell power plants, solar energy property, and
fiber-optic property used to illuminate the inside of a structure. Credits
may be taken against the alternative minimum tax. Expires after December
31, 2015.
Despite a tight federal budget, Congress is under pressure to help fund
alternative energy sources for Americans.
"This is one of the few tax credits that consumers can utilize to reduce
their energy bill. I think as we get mired deeper into the oil crisis and
the electricity crisis this summer, there will be a lot of pressure on the
Hill to pass legislation that is consumer focused," said Resch. "This will
really help those who are on the fence to decide to install solar on their
homes."
