Contrary to erroneous, misleading assertions to the contrary, the federal government’s Solar Investment Tax Credit (ITC) is proving to be an excellent investment for US taxpayers and the federal budget. The Solar ITC can boast of yielding a 10% internal rate of return (IRR) to taxpayers on the government’s initial investment, according to a study conducted by the US Partnership for Renewable Finance (US PREF).
An American Council on Renewable Energy (ACORE) program, US PREF’s study, “Paid in Full,” was based on a model developed by SolarCity and multinational business and tax consultancy KPMG that “examines the cash flows generated by tax revenues on solar leases and power purchase agreements (PPAs) to show that a $10,500 tax credit for a residential system can provide a $22,882 nominal benefit to the government in those scenarios over the life of the solar asset,” according to ACORE’s press release. For commercial solar PV projects, a $300,000 federal solar ITC can yield a $677,627 nominal benefit (not adjusted for inflation) over a similar time frame.
US Clean Energy Policy: Correcting Erroneous, Misleading Assertions…
Of course, ACORE’s analysis of the federal Solar ITC omits additional significant benefits of residential and commercial solar PV use. Reductions in carbon and greenhouse gas emissions associated with fossil fuel production and consumption, as well as enhanced energy security and the possibility of avoiding billions, if not trillions, of dollars (not to mention lives lost) in overseas military forays to secure fossil fuel supplies should figure into the calculus as well.
The ACORE study comes out in the midst of a presidential election year and bankruptcies of solar companies that received federal loan guarantees and qualified for the Solar ITC. The timing of its release highlights a bitter division in Congress over the Obama Administration’s support for renewable and clean energy, the misconceptions being promulgated about the results of such federal programs, and, more broadly, the commercial viability of solar and other renewable energy projects and businesses, according to ACORE.
“Everyone understands that solar power leads to cleaner air and greater independence from fossil fuel,” commented SolarCity CEO Lyndon Rive. “Far fewer people realize that solar incentives can pay for themselves. Solar power has become a political football in this election year, but the investment tax credit has been one of the most beneficial, bipartisan energy policies of this or any other generation.”
The federal Solar ITC has provided an incentive to private sector businesses and investors that has led to significant growth in green job creation, as well as solar energy system installations across the US. Roughly 90% of the nearly 5,000 MW of solar generation capacity has been installed in the US since the ITC was expanded in 2005, according to GTM Research/SEIA’s June 2012 “U.S. Solar Market Insight” report, ACORE notes. The report also showed that U.S. solar installations in 1Q 2012 increased 85% year-to-year.
“The ITC has been very effective in stimulating private sector investment in solar energy, enhancing our nation’s energy and economic security by diversifying our energy mix, and improving our quality of life through a cleaner environment,” ACORE CEO Dennis V. McGinn stated. “As SolarCity demonstrates in the model, it also pays for itself. This policy is both effective and fiscally prudent.”
I've been reporting and writing on a wide range of topics at the nexus of economics, technology, ecology/environment and society for some five years now. Whether in Asia-Pacific, Europe, the Americas, Africa or the Middle East, issues related to these broad topical areas pose tremendous opportunities, as well as challenges, and define the quality of our lives, as well as our relationship to the natural environment.