It’s Not Doomsday, But Neither Is Ending The Solar Tax Credit Good Policy

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Originally posted at

return-of-doomsday-flickr-1upLegoI took the “no” side in a point/counterpoint in the Wall Street Journal this week on the topic: Will Solar Energy Plummet if the Investment Tax Credit Fades Away? It’s been a great conversation-starter, but also an opportunity to clarify ILSR’s position on the tax credit extension.

In short, while allowing the 30% tax credit to expire is not doomsday for solar, it’s bad policy. Congress should maintain support for a zero-fuel, zero-carbon energy resource that can decentralize the economic benefits of the power system.

The biggest problem with killing the tax credit is that, as a blunt instrument, the tax credit doesn’t equally affect all communities. A solar array in Missouri or Minnesota, for example, produces 30% less (or more) electricity per year than one in California or Arizona. While the cost of solar electricity will be at parity with (or better than) electricity prices in the Southwest and some Northeast states by 2017, it will take several more years to reach parity elsewhere. Letting the tax credit expire will mire these markets at a crucial opportunity to get them launched. The following screenshot from ILSR’s interactive solar parity map shows the regional disparity in cost-competitive solar with no incentives in 2017.

Screen Shot 2015-11-19 at 12.07.33 PM

There’s also little point in reducing incentives for clean energy when we continue to subsidize dirty energy. In the last 70 years, the federal Department of Energy has spent twice as much money on fossil energy development as on renewables. And renewable energy has received only 14% of the tax break largess showered on fossil fuels through the last century, and less than half on an annual basis. That’s despite the fact that while solar has no meaningful environmental or health impact from generating electricity, fossil fuel sources like coal continue to socialize their costs.

tax-breaks-630 cropped

The high health cost of coal

Finally, solar energy gives most electric customers, for the first time, the power to choose their energy source, often as an alternative to an increasingly expensive product from a monopoly power company. These companies would like nothing better than to cripple competition for their increasingly costly electricity.

While it’s true that there may be some silver lining to the solar tax credit expiration cloud, it would create more harm than good to give coal and natural gas (and electric monopolies) a free pass while roadblocking solar by cutting the Investment Tax Credit.

Opportunities to Improve

Policy-making is rarely perfect, however, so I can’t resist suggesting a few ways Congress could make the solar incentive better rather than killing it.

1. Make it a cash payment. Cities, counties, schools, and other non-profit organizations can’t use tax credits at all, and many Americans lack the tax liability to use it even as new financing tools are allowing more of them to go solar. The result is the rise of middlemen that suck up much of the tax credit’s value.

2. Adjust it to the solar resource. Awarding the same $4,500 to identical 5-kilowatt solar arrays in Minnesota and California makes the former just competitive with retail electricity prices and the latter a windfall investment. In coastal Oregon, the same tax incentives may not be enough to provide any payback at all. Adapting the incentive to the solar resource would focus its power on the regions that need it most to get the solar market running.

3. Pay for performance. How do we make sure solar arrays are installed properly to maximize electricity production? If we pay for output, rather than simply discount the price up front.

4. Phase out, don’t do lights out. If we truly care about allowing the solar industry to adjust to an incentive-free market, then copy one of the best solar programs out there—the California Solar Initiative. Incentive payments were tied to existing market capacity, stepping down as the market grew. The federal incentive could also be phased out on a predetermined schedule, reducing by 5% per year until it zeroed out in 2022.


The solar tax credit was a blunt instrument for energizing the solar market and it worked. It may be less efficient and less nuanced than it could be, but killing the tax credit isn’t the solution. Instead, ending the credit amounts to unilateral disarmament of solar energy in the face of fossil fuel competition, at an unacceptable cost to the environment, consumer choice, and the coming of energy democracy.

For further reading:
The Federal Solar Tax Credit Extension: Can We Win if We Lose?
Will Solar Energy Plummet if the Investment Tax Credit Fades Away?

This article originally posted at For timely updates, follow John Farrell on Twitter or get the Democratic Energy weekly update.

Photo credit: 1upLego via Flickr (CC BY-NC-SA 2.0 license)

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John Farrell

John directs the Democratic Energy program at ILSR and he focuses on energy policy developments that best expand the benefits of local ownership and dispersed generation of renewable energy. His seminal paper, Democratizing the Electricity System, describes how to blast the roadblocks to distributed renewable energy generation, and how such small-scale renewable energy projects are the key to the biggest strides in renewable energy development.   Farrell also authored the landmark report Energy Self-Reliant States, which serves as the definitive energy atlas for the United States, detailing the state-by-state renewable electricity generation potential. Farrell regularly provides discussion and analysis of distributed renewable energy policy on his blog, Energy Self-Reliant States (, and articles are regularly syndicated on Grist and Renewable Energy World.   John Farrell can also be found on Twitter @johnffarrell, or at

John Farrell has 518 posts and counting. See all posts by John Farrell

7 thoughts on “It’s Not Doomsday, But Neither Is Ending The Solar Tax Credit Good Policy

  • Congratulations to John on making it into the WSJ, if only in the token progressive slot. Of such small victories are great revolutions made.

    The chances of the know-nothing Congress renewing the solar ITC before December 2016 are negligible. If President Hillary has the Congressional votes to restore solar incentives, she might as well go for a better policy as John suggests. A refundable tax credit would be a start.

    • You mean President Sanders and Vice President Clinton. 🙂

  • Good article and many more good articles at

  • Good article – very much agree with the cash award. Disagree with your assertion that the primary reason to keep the incentive is to foster ‘decentralization’, but that is my cross to bear.

    Again, I would argue against the sentiment that subsidies for RE should end in a proper world. Might as well put a gun to the heads of our grandchildren.

    • Better to have all energy pay the full cost of generating it, which would probably add 10 cents a kwhr to coal so paying workers in factories and construction good middle class wages to build solar,wind, and batteries to provide power for less than coal, but maybe 5 cents more that it costs today.

      Since Reagan, the mantra has been free lunches to create wealth because workers are not consumers and consumers are not workers. Slashing wages to increase gdp and make everyone rich is a failed economic theory.

      Only buy paying higher prices to pay higher labor costs can gdp increase and wealth be created.

      Burning fossil fuels is a way to kill jobs and make workers poorer, and that means lower gdp growth because in the real world, gdp can’t increase faster than wage incomes.


  • Your #1 is very important, for allowing a fairer impact.
    Just from a pure saving of health cost, we should cut coal support to zero and either add externals to coal or double RE support. But in a country where coal has had 100 years of government support and gets it still today, it isn’t likely. “You can call me a dreamer, but I’m not the only one. I hope someday …”

  • Thanks for the article, John. The reference from Mother Jones is excellent, highlighting the massive subsidies enjoyed by the oil industry and the political maneuvers used to maintain them. It also highlights the chief difference between renewables and oil subsidies. Recent renewable subsidies are higher than oil annually, but renewable subsidies are not permanent. Last year, the wind PTC did not happen. In 2016, the solar ITC goes away. Contrast that with almost a hundred years of Master Limited Partnerships, oil depletion allowances, and the host of other permanent oil subsidies.

Comments are closed.