BREAKING NEWS! Both houses of Congress came together to pass a $900 billion coronavirus relief package (along with a $1.4 trillion federal spending omnibus for fiscal year 2021) after months of inter-party conflict around just what the bill would entail.
In a huge coup for environmental activists, the text of this massive, 5,593-page omnibus includes provisions for greatly reducing HFC (hydrofluorocarbon) emissions over the next 15 years, billions of dollars in funding for renewable energy research and development, extensions of existing solar and wind tax credits, and the introduction of a tax credit for off-shore wind-based projects.
All this comes together to form what many are naming the most significant climate legislation in over a decade and – perhaps – in all of US history. Already dubbed the “Energy Act of 2020,” if signed into law by President Donald Trump it would be a significant “step in the right direction” for the climate, in the words of Senate Minority leader Chuck Schumer of New York.
The bill comes to the last-minute rescue of the popular and immensely successful solar ITC (investment tax credit) that is currently set to start declining in 2021.
In the Nick of Time: How the Coronavirus Relief Package Saves the Solar ITC
It goes without saying that the Covid-19 pandemic has had a massive impact on all sectors of the economy, including the renewable energy industry – research group Bloomberg NEF projected back in March that 2020 would represent the first “down year” in solar energy demand since the 1980s.
This “speedbump” comes at a rather inopportune moment as, according to climate scientists and other experts, 2020 represents the beginning of the last decade in which the planet can get its act together and avoid irreversible damage to our ecosystem. This makes federal programs such as the solar ITC all the more crucial.
The solar ITC was first introduced back in 2006, and has been a huge success since then: according to the Solar Energy Industries Association, it’s spurred average annual growth of more than 50 % for the solar industry and boosted the area by more than 10,000 % since its inception. Indeed, the solar ITC is the primary motivator behind the development of solar – it goes without saying that, without this extension, we would see a decline in the growth of solar for the foreseeable future.
As such, Democrats in both houses of Congress have made a huge push towards getting this tax credit extended, at first facing opposition from certain Republicans like Senate Majority Leader Mitch McConnell of Kentucky as well as President Donald Trump.
2020 marked the last year the solar federal tax credit would remain at 26 % after a 2015 extension – without the omnibus being made into law, the ITC will decline to 22 % in 2021 and finally to 10 % in 2022 for large-scale projects only (meaning complete elimination for residential solar installation).
If signed into law by President Donald Trump (or if a potential veto is overridden) the coronavirus relief package will extend that 26 % rate for projects started through 2021 and 2022, while falling to 22 % at the beginning of 2023 and 10 % (for commercial projects only) come 2024. Solar industries as well as people wanting to install solar panels on their homes should absolutely take advantage of these provisions in the next few years to save on money while helping the environment.
The statistics mentioned above speak for themselves – the solar ITC has been responsible for huge growth in the solar sector.
Although President Trump is threatening to veto the bill – mainly because he wants to replace $600 checks sent to Americans in need with $2000 checks – it’s safe to the environmental provisions will pass Congress in one form or another, as it’s been overwhelmingly supported by both parties (a two-thirds majority of both houses is required to override a presidential veto).
Whether or not we can expect a further extension of the solar ITC beyond 2022/23 depends partially on the fate of the Senate in the Georgia runoff elections (slated for January 6) as well as – naturally – the 2022 midterm elections, although a sympathetic executive branch is secure at least until 2024.
Fortunately, the bill also allows industries to negotiate longer-term tax credit extensions with the incoming Biden administration and work their policies in with the new President’s carbon emission reduction goals.
The omnibus represents a propitious start for what will prove to be the environmentally-crucial 2020s decade. The ITC beginning to decline at this point in time could spell disaster. For the moment, however, we have some very good news and environmentalists – as well as the planet – can take a deep breath.