Phasing out the federal solar tax credit would be a major mistake. It wouldn’t just reduce the affordability of solar installations for homeowners and business but would further narrow the thin profit margins installers rely on. That means putting about 3,000 jobs at risk in South Carolina, about 250,000 nationwide.
Conversely, extending the tax credit for five years, as was done in 2015, could create about 113,000 jobs and drive some $87 billion in investments by 2030, according to the Solar Energy Industries Association.
That’s why more than 230 mayors and dozens of organizations, including the Palmetto Conservative Solar Coalition, are urging Congress to pass the Renewable Energy Extension Act by the end of the year. Otherwise, federal tax credits for homeowners will zero out by 2023.
Of course, government can grow just about any industry by providing tax incentives, but solar credits make sense for three reasons: They help level the playing field with coal, oil and natural gas, which are heavily subsidized at the federal level and incentivized at the state level through guaranteed profits for utility companies that invest in them. The cost of solar energy production drops every year, since we don’t have to pay for the sunshine. And solar installations produce the cleanest energy possible.
Though bills in the House and Senate have attracted bipartisan support, South Carolina lawmakers have yet to sign on. They should. What’s good for the rest of the country will be good for South Carolina, especially since state lawmakers lifted caps on solar generation earlier this year. And with the Public Service Commission now negotiating the rates utilities will have to pay for solar-generated electricity, South Carolina’s solar energy is poised for another spurt in growth.
South Carolina ranks as the fifth biggest solar market in the country, with more than 80 solar companies operating in the state.
Underpinning the tremendous growth of solar energy in the United States since 2006 has been the federal solar tax credit. It allows homeowners and businesses to deduct 30 percent of the cost of an installation from their federal income taxes.
That knocks the cost of an $18,000 rooftop installation down to $12,600, not including state and local incentives or savings on electricity bills. So reducing the affordability of installations would directly affect jobs.
And though solar energy has grown by about 50 percent a year since 2006, we still have plenty of room for growth. Solar generation accounts for only about 2.5 percent of consumption. But it’s among the cheapest — despite tariffs and other headwinds — cleanest and fastest growing ways to make electricity. It’s an important part of the nation’s quest to establish a more diversified energy mix.
Letting the federal tax credit expire would surely slow the expansion of residential solar, hurting consumers and solar installers the most. And in a world where the economics of solar energy are constantly changing, the federal tax credit has been a stabilizing force.
Congress needs to pass the tax credit extension.
If anything, government should be incentivizing solar energy.