Federal ITC Changes May Alter Local Incentives

Recent changes to the federal residential solar investment tax credit (ITC) will have significant implications for state and local solar photovoltaic (PV) programs according to a new report. The US $2,000 ITC cap has been removed as part of the eight-year extension. In response, state and local programs are currently trying to decide whether or by how much to reduce their incentive levels in response to this additional value provided by the federal government.

The removal of the ITC cap could also potentially impact decisions about program structures, since most residential PV system owners will now be slightly better off with a taxable rebate. Under the US $2,000 ITC cap, most were significantly better off with a non-taxable rebate.

According to Ryan Wiser at Lawrence Berkeley National Labs (LBNL), “other implications are less apparent, but no less important. For example, low-interest loan programs and other forms of ‘subsidized energy financing’ may no longer make financial sense for PV under an uncapped ITC. At the same time, third-party financing and ownership structures that have only recently begun to make inroads into the residential sector may now face a somewhat harder sell.”

Berkeley Lab and the Clean Energy States Alliance have released a new report that analyzes and discusses these implications. Shaking Up the Residential PV Market: Implications of Recent Changes to the ITC, can be downloaded from LBNL.

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