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Published on March 12th, 2014 | by Adam Johnston

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SEIA Calls On Obama To Revaluate Investment Tax Credit Phase Out

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March 12th, 2014 by
 
Suggestions of ending the Investment Tax Credit (ITC) for US solar energy projects has the industry’s top official wanting the White House to revise its position.

President Barack Obama released last week in his 2015 fiscal year budget the phase-out of the ITC by December 31, 2016. In its place is the less lucrative Production Tax Credit (PTC).

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Image Credit: Solar Panels at Seldom Rest Farms via WikiCommons

Rhone Resch, CEO and President of the Solar Energy Industries Association (SEIA), contended that axing the ITC and replacing it with the PTC is a “huge step backward” in developing US solar policy.

“Since the solar ITC became law in 2006, installed solar capacity nationwide has grown from 680 megawatts (MW) to nearly 13,000 megawatts.  That’s enough clean, reliable and affordable electricity to power more than 2.2 million homes,” Resch said on the SEIA website.

“Smart, forward-looking public policies like the solar ITC have helped to create 143,000 good-paying American jobs and pump tens of billions of dollars into the US economy, while helping to protect our environment and fight climate change,” he said.

How less fruitful is the PTC compared to the ITC?

The PTC only provides a tax break of $0.022/kWh on projects. In comparison, the ITC offers developers up to a 30% write-off on operational development costs.

Resch pushed for keeping the ITC in order to further advance future economic growth, as the change in tax policy could hurt future solar investment.

“The PTC simply can’t address the upfront costs of fuel-free solar projects, and we believe the Administration’s sudden, 180-degree shift in tax policy could have devastating consequences on the future development of solar energy in America,” he said.

While the proposed elimination of the ITC may hurt future solar projects, new solar capacity continues to increase.

With a total of 4,751 megawatts of new solar photovoltaic capacity installed last year, solar produced 29% of all new US electricity capacity in 2013, compared to only 10% in 2012. Natural gas with first with 46%.

Some will suggest eliminating the ITC is part of solar energy’s maturing process. However, compared to other energy industries in the past, including oil and gas, solar is still very young and will need strong incentives as it continues to climb up the energy mountain in competing with its fossil fuel counterparts.

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About the Author

is a University of Winnipeg graduate who received a three-year B.A. with a combined major in Economics and Rhetoric, Writing & Communications. Adam is currently attempting to become a freelance social media coordinator. His eventual goal is to be a cleantech policy analyst, and is currently sharpening his skills as a renewable energy writer. Adam is also working on a book on cleantech and how to relate it to a broader audience. You can follow him on Twitter @adamjohnstonwpg or at www.adammjohnston.wordpress.com.



  • jp

    Tax credits are bad funding mechanisms, that transfer wealth from the poor to the rich, and give us monsters like tax equity funds.

    Getting rid of the ITC would be great!
    Unfortunately a PTC is fundamentally bad policy for exactly the same reason.
    If you want to subsidize something, use a direct cash transfer available equally to all.

    Disingenuous stupid lines like ‘the Administration’s sudden, 180-degree shift in tax policy’ should not be quoted except to ridicule them.

    • Bob_Wallace

      What’s the difference between allowing XYZ wind farm pay $1,000 less in tax (PTC) and giving them $1,000 (grant)?

      Well, one difference is that they have to turn a profit in order to pay less tax…..

      • Matt

        It is why non-profits and community groups don’t get a benefit. And sell the tax credits gets only a tiny amount back.

  • Jim Smith

    how about reducing it from 30% to 20%, and reducing the subsidies for oil and gas companies too?

    • sault

      Knowing how Congress works, a reduction or phaseout of the solar ITC will go in coupled with elimination of some fossil fuel subsidies, lobbyists will get their hands on it, and then only the solar tax breaks will actually get cut.

    • anderlan

      We already have a phase out of the ITC set to occur in 2016, going down to 10%. So, this is just some sort of ‘code harmonization’ thing (making solar more like the wind PTC and going to a PTC for all ‘renewables’) that seems to have gone awry I think.

    • Banned by Bob

      We’ve already determined in previous posts that the fossil fuels subsidies amount to about 2% of the value of the production. Not that they shouldn’t be eliminated, as they are unnecessary. But they are nowhere near as high as these subsidies.

      • Jim Smith

        oil subsidies and giveaways are massive

        http://priceofoil.org/fossil-fuel-subsidies/

        • Banned by Bob

          All Federal subsidies are massive

          • Jim Smith

            agree. time to start cutting! Oil, Bank, Farm, Foreign Aid….they all need to be cut.

      • Bob_Wallace

        What if there were two new technologies and you decided to support them both until they were able to get their feet on the ground and get their prices competitive?

        And then one of them got more expensive while the other got less expensive.

        Do you think it wise to keep supporting the technology whose price continues to rise? And has continued to rise for more than 50 years?

        Or at some point do you start backing the winner and cut the loser loose?

        • Banned by Bob

          I’m all for elimination of fossil fuel subsidies. They are unneeded, as witnessed by the ability of oil companies to attract capital.

          Oil prices have not kept up with inflation over the past 50 years. Can’t just complain about the price of milk or bread without keeping it in the context of real dollars.

          • A Real Libertarian

            “Oil prices have not kept up with inflation over the past 50 years. Can’t just complain about the price of milk or bread without keeping it in the context of real dollars.”

            Adjusted for inflation, oil was $22-$23/Barrel then:

            http://inflationdata.com/inflation/inflation_rate/Historical_Oil_Prices_Table.asp

          • Banned by Bob

            All commodities lose value over time, in spite of the volatility that they all exhibit from time to time. The trend for oil/copper/Ags etc over time is flat to down in real terms.

            And inflation adjusting should be done with market interest rates, as the CPI basket of goods is not static.

            http://en.wikipedia.org/wiki/File:Crude_oil_prices_since_1861.png

          • A Real Libertarian

            “All commodities lose value over time, in spite of the volatility that they all exhibit from time to time.”

            Wrong.

            “The trend for oil/copper/Ags etc
            over time is flat to down in real terms.”

            “Real” being defined as “My belief of what inflation is”?

          • Bob_Wallace

            Did you happen to look at the graph you posted?

            Yes, back in the 19th Century oil was expensive. But during the 21st Century the inflation adjusted cost of oil has been rising.

      • mds

        Seriously? The smaller percent argument again? …sssoooo lame.
        The percentage is lower because fossil fuels have been around for over a century and produce more power. The total dollar amount of the subsidies given to fossil fuels is much, much greater than that given to renewables …and solar has a smaller part of the renewables subsidies.
        Why should fossil fuels get any subsidies? They are all fully mature technologies and have been profitable for many decades. Fossil fuels should NOT need ANY subsidies! Should we have continued to subsidize stage coaches or steam ships?
        Individuals who use the lower percent argument are either fools or charlatans. Take your pick.
        The ITC plan goes from 30% to 10% for solar after 2016. Fine by me. It is clearly helping to increase the amount this clean NEW energy technology and reduce the cost. Fossil fuels are on the way out. We spent more on them and still they remain expensive. They are not getting cheaper. Only a fool defends oil and coal subsidies …or somebody who is profiting from this theft of public dollars. This charity for rich corporations is a total outrage …obviously. Please wakeup and smell the exhaust.

      • Matt

        Even if you don’t believe in climate. The health cost externals, are a massive subside. So if we dropped the small 2% subsidies (I’ll use you number) and then add a health externals recovery tax (last est. for US was $0.3-0.5 Trillion/year, low ball is $0.2T). 2012 for Thermal/Fossil was 2775 TWh. So $0.20-0.50 for each 2.775kwh so about 1-2 cents per kWh. Wait 2.3 cents is the what wind gets for 10 years. And coal has been around for over 100 years. Oh and that leaves off environment/personal costs of things like the clean coal chemical spill VW, or the coal ash spill Duke.

        Of course to be fair we need to have them pay up for past damage, lets pick up a little for the past 60 years over next 20. So we just charge 4-8 cent/kWh to all fossil electric generation. Rebate to equally to each deduction (not counting doubles of some people) on federal tax.

        TWh from http://en.wikipedia.org/wiki/Electricity_sector_of_the_United_States

        • Banned by Bob

          If you’re going to make an argument on externalities, you have to add all of the benefits associated with the consumption of energy. Can’t simply cherry pick the presumed negatives.

        • climatehawk3

          I agree with your general thrust here and am skeptical of the calculus re the benefit of energy consumption.I think we are addicted to (cheap) oil (polluting fossil fuels sources of which we defend with our defense dollars).this ITC is a small carrot while we have no sticks practically.exchanging the ITC for a real stick-like a gradual revenue neutral replacement of the payroll tax with a carbon tax I would applaud.my concern is that the adinistration for some reason wants to suggest dropping the ITC without getting anything substantial in return.annoying.similar to “all of the above”.likely some small ball political move which only the policy wonks will notice and will motivate no one.and since the congress is ignoring the proposal anyway,why make this concession?

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