The U.S. solar industry is beginning meticulous preparations for dealing with the phase out of the federal investment tax credit (ITC). At the same time, voices calling for an extension of the ITC or a softening of its decline are getting louder.
“Climate change is topical thanks to the Green New Deal, among other things,” SunPower CEO Tom Werner said onstage Tuesday at Greentech Media’s Solar Summit in Phoenix. “We need to do something about climate change, and the most straightforward thing is to extend the ITC and the [wind] PTC.”
2019 is the last year that the solar industry can take advantage of the ITC’s full 30 percent value before it incrementally steps down to 10 percent in 2022 and beyond for commercial and utility projects. The credit drops to zero for residential installations in 2022.
Solar companies have made clear they’re not banking on an extension of the ITC, and many see the likelihood of an extension as low. Part of the renewables industry’s pitch as it sought and ultimately secured a multi-year extension of the wind PTC and solar ITC in 2015 was that a phasedown would help usher in a post-subsidy era.
But the possibility the solar ITC could be extended once again is now being openly talked about, by the industry as well as politicians.
“I’m not sure anyone would say we can plan around congressional action,” Alex McDonough, vice president of public policy at Sunrun, said onstage Tuesday. “The prudent thing to do is to prepare for a phasedown and advocate for an extension.”
“I do see the building blocks for a deal coming together, but we have to prepare,” McDonough said.
In its latest lobbying disclosure, the Solar Energy Industries Association, the industry’s main trade group, notes the extension of the tax credit among its issues of focus. In early April, over 100 members of Congress signed a letter of support for clean energy tax incentives. The solar industry sees the current political focus on climate change as advantageous to its cause.
In a later interview, Werner said SunPower “absolutely” supports extending the credit, despite many in the industry having assumed the previous extension would be the last.
“We as an industry said get us out to 2020 and that’s good. Now we’re out to 2020 going, well, it’d be great if you pushed that even further,” Werner told GTM.
“So I think the contradiction is real. What I would advocate for is to step [the ITC] down slower,” he added.
Werner called the credit’s current decline “fairly dramatic,” but said the industry needs to evolve beyond reliance on incentives.
“When we were going through the extension last time, I said the idea of it sunsetting in a few years makes sense, because we need to get costs down and we shouldn’t have to rely on a tax credit forever,” he said.
“But it’s a fairly dramatic stepdown, so … something that’s more than three years before it goes to zero would be something we would absolutely advocate for.”
SunPower, like many companies, is not holding its breath for an extension. Werner puts the chances of an extension in the 10 to 15 percent range.
In the meantime, SunPower is hedging its bets by qualifying solar equipment for the full ITC.
Developers can “safe harbor” projects by investing 5 percent of the total cost, a strategy the wind industry — whose PTC is phasing down even faster — has been pursuing at huge scale for several years.
Safe harboring is on the minds of many in the solar industry these days.
Scott Moskowitz, director of strategy and market intelligence at solar manufacturer Hanwha Q Cells, said the time to plan is now. “There is still supply available, I think there’s a lot of time left in 2019,” he told the conference.
Tanguy Serra, chief strategy officer at solar loan provider Loanpal, said the industry will keep pushing ahead regardless of whether the ITC phases down on schedule.
“As long as the industry really focuses on reducing costs … things will be fine,” said Serra. “And if the ITC gets extended, that creates more runway.”