Congress Passes Multi-Year Extension of Wind and Solar Tax Credits
On December 18, 2015, Congress passed a multi-year extension of the 30% investment tax credit (ITC) for solar and a 2.3 cent production tax credit (PTC) for wind. The tax credit extensions were included in a bipartisan $1.1 trillion spending bill, which included the removal of the ban to export oil.
- Scheduled to expire at the end of 2016, the ITC for solar was extended through 2021 with the following ramp down schedule:
- 2017 – 30% tax credit
- 2018 – 30% tax credit
- 2019 – 30% tax credit
- 2020 – 26% tax credit
- 2021 – 22% tax credit
- A permanent 10% ITC remains in place for commercial solar projects in 2022 and beyond.
- Solar also benefits from a change in eligibility requirements. Projects must now begin construction, as opposed to being in service to qualify for the ITC.
- Unlike the fixed ITC, the PTC can change over time as the incentive is benchmarked to inflation.
- Having expired at the end of 2014, the PTC for wind was extended through 2019 with the following ramp down schedule:
- 2015 – 100% PTC
- 2016 – 100% PTC
- 2017 – 80% PTC
- 2018 – 60% PTC
- 2019 – 40% PTC
- 2020 – PTC expires
- Wind projects must begin construction in order to qualify for the PTCs.
The extension of the tax credits provides the solar and wind industries multi-year certainty and, for the first time, a gradual ramp down. The extensions, which are surprising in scope, will drive significant additional growth in both industries. For example, GTM Research estimates the action will result in 25 gigawatts of additional solar through 2020—a 54% increase over prior estimates.
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