Hawaii Solar Blog

Take Advantage of Solar Tax Credits

solar tax credits

Tax policies have played a crucial role in the advancement of renewable energy in the United States. The Investment Tax Credit (ITC), which is a 30% federal tax credit available for solar PV and solar water heating systems, has been hailed as the “cornerstone of continued growth of solar energy” by the Solar Energy Industries Association (SEIA).

History of Federal Tax Credit

The ITC was first implemented from January 1, 2006 through December 31, 2007 as part of the Energy Policy Act of 2005. With unprecedented growth including the amount of solar capacity installed in 2007 being double the capacity installed in 2006, the commercial and residential solar ITC was extended through the end of 2016.

The federal tax subsidy is recognized for stabilizing the solar industry and providing an incentive that has enabled annual solar installation to expand by more than 1,600 percent since the ITC was first applied in 2006.

Current Status of Federal Tax Credit

The solar industry had been preparing for the federal tax credit to expire in 2016, but the 30% credit has been extended until 2019. The credit will then reduce to 26% in 2020, 22% in 2021, and 10% in 2022.

According to GTM Research, the ITC extension will result in $40 billion in incremental solar investment between 2016 and 2020. “The ITC extension currently written into the omnibus spending bill will result in a 20-gigawatt annual solar market in the U.S. by 2020,” said Shayle Kann, senior VP of GTM Research. “At that rate, more solar will be installed each year than was added to the grid cumulatively through 2014.”

State of Hawaii Tax Credit

In addition to the federal tax credit, Hawaii residents and business owners can take advantage of the state’s renewable energy tax credit, which has existed since 1976.

Hawaii’s tax credit was intended to provide a credit for each solar system installed, but the word “system” acquired new meaning when micro-inverters were successfully introduced into the market in 2008. Due to the structure of the micro-inverter system and unclear wording that could interpret a system according to the number of inverters or connections to the electricity system, homeowners claimed each micro-inverter as a separate system and even installed systems with multiple connections to the electrical grid for no apparent electrical purpose, in order to apply for more than one state tax credit.

To avoid this confusion and stop the abuse of renewable energy credits while still encouraging solar adoption, a law was passed in 2013 that redefines a solar energy system according to its total output capacity, or the amount of kilowatts generated.

The Hawaii state tax credit for PV system installations is currently set at 35%, up to $5,000 per system, on a single family residential property. Solar water heater installations on single family homes also qualify for a 35% tax credit, up to $2,250.

With a sunny climate year-round coupled with among the highest electric rates in the nation, the savings associated with solar energy are attractive enough to justify a solar installation investment, but add the 30% federal and 35% state tax credits in and it’s a no-brainer. Contact Haleakala Solar today to find out about the best solar solution for you.

Federal Solar Tax Credits To Be Extended

solar tax credits extended

On Friday, December 18, 2015, right before lawmakers adjourned for the holidays, Congress passed a spending bill making the solar Investment Tax Credit (ITC) available for several more years and extending the Production Tax Credit (PTC) for wind power and other renewable energy technologies. President Obama has voiced support of the extensions and is expected to sign the bill into law.

The solar Investment Tax Credit, which was scheduled to step down to 10% on January 1, 2017 and expire entirely for individuals, was extended for as many as eight years as part of a $1.15 trillion spending bill. The solar tax credit for utility-scale and commercial solar projects was extended until 2024 with a gradual phase out starting in 2020. The solar tax credit for residential rooftop solar will stay at 30% for three more years, and then decline incrementally through 2021, and remain at 10 percent permanently beginning in 2022. The bill also allows for solar PV projects to claim the solar tax credit for the year in which they begin construction.

“By extending the solar investment tax credit for five years with a commence construction provision and a gradual ramp down, bipartisan members in both Houses have reestablished America as the global leader in clean energy, which will boost our economy and create thousands of jobs across America,” said Solar Energy Industries Association president and CEO Rhone Resch.

The 2.3-cent wind PTC will also be extended through 2016. Projects beginning construction in 2017 will see a 20 percent reduction in the incentive, and the PTC will continue to fall 20 percent each year through 2020.

Geothermal, landfill gas, marine energy, and incremental hydro will all receive a one-year PTC extension and, if developers choose, the technologies will also qualify for a 30 percent ITC. The bill expanded grants for energy and water efficiency as well.

In exchange for the tax credit extensions that Democrats wanted, Republicans got what they hoped for with an end to a 40-year ban on the export of crude oil.

“While lifting the oil ex­port ban re­mains atrocious policy, the wind and solar tax credits in the Om­ni­bus will eliminate around 10 times more car­bon pollution than the ex­ports of oil will add,” Pelosi wrote in a letter to lawmakers.

According to GTM Research, the solar ITC extension will help the U.S. have a 20-GW annual solar market and propel nearly 100 cumulative gigawatts of solar installations by 2020, resulting in $130 billion of total investment. That’s enough to power at least 19 million homes and represents 3.5 percent of U.S. electricity generation, which is up from 0.1 percent in 2010.

Article Source:
Green Tech Media

President Obama Pushes To Extend Solar Tax Credits

obama solar tax credits 2016Earlier this month, President Barack Obama released his 2016 budget proposal, which includes a 7% increase in clean energy funding along with $4 billion allotted to encourage states to accelerate their carbon reduction plans.

“Our nation thrives when we are leading the world with cutting-edge technology in manufacturing, infrastructure, clean energy, and other growing fields,” said President Obama in his budget message.

Obama’s proposed budget, which still must be approved by Congress, involves extending the solar tax credits on the federal level which benefits the solar industry and other clean energy industries.

$4 Billion for States to Increase Emission Cuts

The administration is finalizing guidelines that would cut down carbon dioxide emissions from power plants nationwide. The new fund would be available to any state that is trying to lower their emissions faster or more than the government mandates. States could use the capital to finance clean energy technologies, create incentives for businesses to increase their energy efficiency, and improve low-income communities that face “disproportionate impacts” from the affects of climate change and environmental pollution. Hawaii already has our Clean Energy Initiative of 70% clean energy by 2030 in place, so we are most likely ahead of the curve.

45% Proposed Increase in Solar Funding

The budget proposal requests an overall total of $336.7 million for the federal government’s solar energy technologies program within the DOE’s Office of Energy Efficiency and Renewable Energy. This $336.7 for the solar program would include $62 million for photovoltaic R&D, $67.3 million for balance-of-systems cost reduction, and $48.4 million for concentrating solar power.

The Department of Energy requested $29.9 billion, $2.5 billion more than the amount enacted for 2015, to focus on making the electric grid more resilient and reducing methane emissions from natural gas systems.

Permanent Wind and Solar Tax Credits

Obama’s budget, which still must be approved by Congress, also calls for the permanent extension of the Investment Tax Credit (ITC) for solar energy and Production Tax Credit (PTC) used by the wind industry. The ITC, which was introduced in 2006, enables solar developers to write off up to 30% of the development costs of solar projects once projects come into service. Rhone Resch, president and CEO of the Solar Energy Industries Association (SEIA), credited the ITC for helping the solar industry boost U.S. solar capacity from 680 MW to 13 GW, offset over 20 million metric tons of damaging carbon emissions into the air every year, and increase employment by more than 85 percent over the past four years. Under the current plan, the ITC is scheduled to drop from 30% to 10% at the end of 2016.

Hawaii Solar Tax Credit for PV Battery Backup

While Obama is trying to extend the solar tax credit on the federal level, Hawaii is considering a bill that would give a tax break especially for PV battery backup systems, since currently battery systems qualify for tax credits only when installed with PV systems. H.B. 212, which was introduced by Rep. Scott Nishimoto of the Hawai‘i State Legislature, establishes a nonrefundable income tax credit for “equal to twenty-five per cent of the actual cost of each battery backup system installed or the cap amount determined in subsection (b), whichever is less,” according to the bill. As of February 12, 2015, the Energy and Environmental Protection Committee unanimously recommended the measure be passed with amendments.

We certainly live in a historic time for energy and solar power. At Haleakala Solar, we are excited to see what the future holds for PV and look forward to sharing important solar news with you. If you’re interested in staying updated, please connect with us on Facebook, Twitter, and Google+.

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