It was the last day of work in 2015 for the United States Congress on Friday. But instead of winding down and leaning into the holiday break, they passed the biggest federal policy development of the year. The House of Representatives and the Senate jointly approved a huge spending package, and within it, an extension for the Investment Tax Credit (ITC) for solar and wind energy technologies. Instead of expiring in 2016, the ITC will continue for residential rooftop solar for five additional years (and a few more for commercial and utility-scale projects.) This is amazing news.
We’ll explain more about the details of the Investment Tax Credit in a minute, but first, we just want to take a minute to celebrate. This is a big deal. A really big deal. The ITC extension is going to completely transform the solar industry, and with it, the home battery market. We couldn’t be more excited, and you should be just as pumped as we are. Here’s why.
The Force is Strong With This One
“May the force be with you,” said Senator Dianne Feinstein, trying to persuade her fellow Senators to follow the House of Representatives’ decision to pass the spending bills. In the end, the force was definitely with solar systems… rooftop solar, that is.
The solar Investment Tax Credit (ITC) is one of the biggest and more important federal policies in support of solar energy installations in the United States. The ITC drives the growth of the solar industry more than anything else could, creating jobs, and motivating new in-depth research. Without the ITC boosting the solar industry, the U.S. would be without 80,000 jobs and over 60 gigawatts of solar capacity over the next five years. Like we said, it’s a big deal.
“There’s no way to overstate this -- the extension of the solar ITC is the most important policy development for U.S. solar in almost a decade,” said MJ Shiao, GTM’s director of solar research. Other resources across the country are also waking up to the mind-blowing reality of what just happened. The solar market is about to change forever.
What is the Solar ITC?
In short, the ITC is a federal tax credit that pays back 30 percent of the installation of solar systems for residential customers (think rooftop solar panels) as well as commercial and utility-scale projects. The credit is used by the company that installs, develops, or finances the solar project in the case of commercial properties. For homeowners who purchase solar systems and have them installed on their own property, the credit is applied to the homeowner’s income taxes. Tax credits like the ITC provide a dollar-for-dollar reductinon of the income taes of the person who is able to claim the credit. This money would otherwise go to the federal government, but in the case of a tax credit, the money stays exactly where it is: in the pocket of the homeowner. The credit is based on the amount of money the investor put into the solar panels they installed on their property. However much money is invested, 30 percent can be credited back. For residential customers investing their own money in solar panel installations, this awesome. Along with the falling price of solar panels and the great benefits of… ahem… free, clean solar energy, the ITC makes rooftop solar installations a lot more viable for residential customers.
This is why the ITC is credited with the dramatic growth in solar installations, both residential and commercial, since it was initially set in place in 2006. In the past ten years, annual solar installation has grown by 1,600 percent. That’s not a typo. Solar panel systems have been installed at a crazy fast rate recently. Not to mention the 86% growth in solar employment in the last four years, making the job creation rate in the industry almost 20 times higher than overall employment growth in the country. Excited yet? Let’s get into more of the benefits of the ITC extension.
The Direct Effect of the ITC Extension
No one was looking forward to the expiration of the solar Investment Tax Credit in 2016. Most were downright dreading it, especially solar companies. The market forcast company IHS had predicted a 10% global decline of solar capacity installation after the expiration of the ITC. Now, the future looks a lot brighter.
“This forecast has now been reversed,” said IHS. The company now predicts huge growth of solar, even in 2016 and 2017 alone.
The solar ITC extension will change the way the US approaches the entire solar industry. The US was already one of the world’s biggest investors in clean energy, but Bloomberg New Energy Finance predicts that the ITC extension will double the solar capacity currently installed around the country. Think of it this way: in the next five years, the United States will install as many solar projects as we have so far… since the beginning of solar time.
This acceleration in the solar market is going to have some amazing effects on the economy, and the climate. The Investment Tax Credit will likely speed up the shift from fossil fuels to renewable energy sources more powerfully than the Clean Power Plan implemented by President Obama, or even the global climate deal struck this month in Paris. All this according to Ethan Zindler, the head of U.S. policy analysis at Bloomberg New Energy Finance.
“This is massive,” Zindler said, predicting that the drop in solar panel installations, which has already been extreme, will continue until coal and natural gas are no longer cheaper than subsidized renewable energy. When the ITC expires in 2021, Bloomberg Finance predicts solar and wind will be the cheapest forms of new electricity in most of the U.S. We’re going to be surrounded by cheap, clean energy. Now, let’s figure out where to put it.
The ITC and Home Batteries
The investment tax credits are great for individuals looking to install solar panels, but they are also fantastic news for the clean energy and energy storage industries as well. The ITC is valued at around $25 billion spread over the five years, and is likely to motivate $38 billion in additional investment in solar companies from outside sources. This investment is what will continue the momentum in dropping costs, and enable new and more efficient technology to rise. The effect of more accessible energy storage for all, as well as awesome new technology, will have an effect that will last far beyond the expiration of the tax credit program.
The unexpected bill has already caused a huge investment in solar companies like SolarCity, SunEdison, and SunPower, with stocks soaring up to 34 percent this week. With the industry about to boom, everyone wants a piece of the bright future forecasted for the solar industry. And as investors give more and more capital to solar companies, they are investing in their other projects as well.
What else are these companies interested in? Home batteries.
SolarCity teamed up with Tesla to roll out home batteries in conjunction with their DemandLogic energy use technology. SolarCity’s DemandLogic helps customers save on their electricity bills by avoiding the higher rates and additional charges that come with electricity at peak demand hours. By offering home battery storage technology along with their smart solar systems, SolarCity is excited to help customers save even more on their bills, by providing a way to store the electricity generated by their solar panels.
SolarCity isn’t the only one getting into the home battery scene. SunEdison announced it will supply advanced battery systems for a new pilot project in California. The project, aimed at creating net-zero energy home environments, will begin development in Fontana, California. With the project, SunEdison says they want to “help Californians prepare for the future of the grid, where homes and businesses will be generating their own electricity on a much greater scale than we are seeing today.” SunEdison’s advanced battery systems will enable the homes to store solar-generated electricity, cutting their independence on the traditional grid.
SunPower is committed to a similar pilot program, building energy storage along with solar installations in new homes with U.S. homebuilder KB Homes. Without home batteries, households with solar panels can’t get the full value of the electricity they generate, or have the benefits of reliable backup power and grid independence.
Solar and storage go hand in hand. So when the solar industry gets a major boost, like this one from the ITC extension, home batteries soar right along with it. We’re excited about a future where home batteries are standard with every home, and households around the world can stop worrying about the unreliable grid, and enjoy clean, stored energy whenever they need it.