The US government has spoken. Instead of extending the 30% ITC or allowing this crucial tax credit to decrease to 10%, it will be replaced at the end of 2016 with a refundable production tax credit, PTC, which is based on electricity generated after the system is built. In news that certainly does not make up for this action, the 2015 solar budget increased by 9.8% from $257.1-million in 2014 to $282.3-million in 2015.
From the budget: “FY 2015 funding supports the SunShot Initiative goal to achieve a cost of solar power of $.06/kWh to make solar power cost-competitive without subsidies by 2020. This includes solar photovoltaic R&D; activities that enable a 50% reduction in non-hardware “soft costs”; and development and demonstration of innovative solar energy manufacturing technologies to increase U.S. competitiveness, in support of DOE’s Clean Energy Manufacturing Initiative. FY 2015 funding also supports development of advanced thermal storage and supercritical CO2 power cycles so that concentrated solar power can achieve base-load grid parity.”
While it is gratifying to see renewed support for domestic manufacturing, it is difficult to understand the US government’s purpose in replacing the ITC with the PTC, nor are the significant downward expectations for the cost of solar electricity potential outcomes of which are abandoned systems, bankrupt systems and disappointed investors.
It is possible that the US Government reasons that the installation cost is low enough currently to switch to a system that rewards output. It is unlikely that consideration was given to the potential consequences of this significant change, which range from business as usual (with only the well-healed able to participate), to a rapid cessation in deployment. The new plan throws support for solar deployment back into the laps of the states and does nothing to defray the capital costs of solar construction and will most likely slow the market for solar in the US. Before it slows, however, there will be a mad rush to complete projects before the deadline. Given the long development timeline for most projects, this means that some will not be completed by the deadline and will not be available for the ITC, having to settle for a PTC.