Federal Solar Incentives Under Threat: Hurry and Set Up Your Solar Panels or Face Potential Cost Increases
Solar Tax Credits in Doubt: A Reshuffling of Renewable Energy Prospects
Here's the deal, folks: The U.S. House of Representatives took a swipe at the solar industry by suggesting it's time to bid adieu to federal solar tax incentives this year. Yep, you heard that right! If this proposal makes it past the House and swallows the Senate, the economic feasibility of solar power could take a hit.
"This is a dark day for us," said Glen Brand, directing policy and advocacy at Solar United Neighbors, a non-profit championing the cause of solar adoption. "It's like they're kicking the ladder out from under ordinary Americans when it comes to affordable energy."
The flames of solar power were initially kindled back in 1978 with federal tax credits but got snuffed out in 1985, when Reagan was in office. But George W. Bush shifted gears in 2005, breathing new life into the solar incentives. Lawmakers have been slowly tweaking and extending these sweeteners ever since, most recently with the 2022 Inflation Reduction Act (IRA), which set the tax credit at a whopping 30% until 2032, before a gradual phase-out.
So, what's the skinny on the cost of a solar system these days? Zoe Gaston, a principal analyst for residential solar at wooden Mackenzie, puts the current price just north of $28,000. That translates to a tax credit of around $8,500.
However, the House Ways and Means Committee stepped up this week, releasing a preliminary budget reconciliation proposal that could scrap vast swatches of the IRA – namely, support for residential solar. In other words, the 25D tax credit would still apply for systems installed this year but go poof afterwards.
The rub? Without those credits, solar systems might still make financial sense in sunny Localities or energy-strapped ones, but the payback period will probably stretch. Some folks may face an energy math problem that just doesn't add up.
"Get the green light on solar panels for your home as soon as possible," advises Gaston. While the 25D credit isn't the only endangered tax break, its demise would create quite a stir across the solar landscape.
And it's not just the residential solar scene that's spinning out of control. Another credit, 48E, is available to businesses that install solar on homes where the resident either rents the gear or signs a power purchase agreement. Limits, not elimination, is on the radar for 48E, but experts are still wrestling with the fine print.
But wait, there's more! Some states are pitching a fit too, like California. The Golden State has been dialing down the amount homeowners can earn back by pumping energy back into the grid, reducing the appeal of going solar. Companies have already been trimming payroll, with layoffs following close behind.
So, what does the future hold for solar? Well, Brand believes the Senate can save the day, but the industry is already clocking damage from the House's erratic policy dance.
"Policy volatility is my bigger worry," said Jacquelyn Pless, a professor who researches energy and environmental economics at the MIT Sloan School of Management. "Policy inconsistency can hamper investment, raise costs, and damage market confidence."
Stay tuned for how this unfolds, as the solar industry gears up for a rollercoaster ride in the coming months!
This article has been lightly rewritten based on data from Grist, a nonprofit media organization focusing on climate solutions and a sustainable future.
You can learn more about Grist at https://grist.org/about/
- Glen Brand, the directing policy and advocacy at Solar United Neighbors, expressed concern about the potential removal of federal solar tax incentives, stating it's like taking away the ladder for ordinary Americans to access affordable energy.
- The initial surge in solar power was initiated with federal tax credits back in 1978, but they were abolished in 1985, only to be revitalized by George W. Bush in 2005.
- The House Ways and Means Committee recently proposed a budget reconciliation that may scrap parts of the 2022 Inflation Reduction Act, including support for residential solar and the 25D tax credit.
- Without the 25D tax credit and other incentives, solar systems may still be financially viable in suitable locations, but the payback period might increase, potentially causing energy-related math problems for homeowners.
- The solar industry, not just the residential sector, is in a state of flux, with potential policy changes affecting tax credits for businesses and states like California slashing the amount homeowners can earn by selling excess energy back into the grid.
- Jacquelyn Pless, a professor who specializes in energy and environmental economics at the MIT Sloan School of Management, highlighted that policy inconsistency and volatility can hinder investment, increase costs, and harm market confidence.
- The solar industry braces for a rollercoaster ride as it navigates the uncertainties of policy-and-legislation in the coming months, with the future of renewable energy dependent on the outcome of ongoing discussions in the House and Senate.
