The solar industry has stepped into a new level of complexity over its tax subsidies, while facing new hurdles in states, after winning a big victory in the omnibus spending bill.
Solar power developers got a big boost from Congress when lawmakers approved a massive spending bill in December that included a five-year extension of the crown jewel of tax subsidies for solar, the Investment Tax Credit.
But solar energy representatives say the federal wrangling may have just begun, as they go to the Internal Revenue Service to work out the details of the long-term subsidy and make sure the government doesn’t get it wrong.
The five-year extension of the tax credit is actually a phaseout of the subsidy. To allow the industry to take maximum advantage of the subsidy at its highest level, a new lever called a “commence construction clause” was included in the extension.
The clause says that as long as some construction has begun within a qualifying timeline, the solar project can receive the credit even if it’s not finished.
Sounds simple enough. Put some rivets in the roof and you’re ready to go, right? Well, how many rivets? And what kind of roof? These are the kind of details that have to be worked out to satisfy solar lawyers and make sure solar projects can take full advantage of the credit.
“We’re working to make sure that the extension with commence construction is implemented correctly,” said Alexandra Hobson, spokeswoman for the Solar Energy Industries Association, the lead trade group for the industry.
The wind energy industry got its commence construction clause years ago at a time when its subsidy was on the congressional chopping block year after year. Wind industry lawyers struggled for a year or two to get the certainty they required from the IRS.
With every new guidance the tax agency gave on the construction clause, new questions popped up that the industry demanded clarity on, according to officials engaged in the talks. But without it, the growth of the wind industry would have stopped, due to Congress’ resistance to extending the tax subsidies, observers say. The wind industry also received a five-year extension in the spending bill.
The solar industry also is gearing up for a fight in the states over complicated net-metering rules, which are key to allowing solar panels to produce electricity for their owners and, at times, move energy onto the wider grid. The rules, a key incentive for the industry, allow consumers to be compensated for generating power.
An industry representative says net-metering rules have become an important issue in getting solar built in key states such as Nevada.
The Solar Energy Industries Association says the Nevada Public Utilities Commission made “drastic changes” to its rules earlier this month that do not grandfather the state’s existing solar customers.
“This decision is at odds with public comments by all outside parties and the majority of customers who supported keeping intact existing net metering rules,” the group said.
“Despite all of the support this measure had, the commission chose to vote against the will of Nevadans,” said Sean Gallagher, the solar group’s vice president for state affairs.
“Without question, this is extremely detrimental to clean energy and job growth in the state and we do not view this as a productive step in Nevada’s efforts to maximize the many benefits — from environmental to economic — that solar provides,” he said.
The group is also waging a campaign in the Massachusetts legislature to get changes to the state’s rules to remove a cap on the amount of electricity solar owners can transmit back the grid.
“We urge policymakers to raise the caps on consumer sales of electricity back to the grid,” Gallagher said. “This must be achieved through quick legislative action to maintain investment and jobs.”
