The US Investment Tax Credit for Solar Energy: Alternatives to the Anticipated 2017 Step-Down

The US Investment Tax Credit for Solar Energy: Alternatives to the Anticipated 2017 Step-Down

By
Stephen Comello, Stefan J. Reichelstein
Renewable and Sustainable Energy Reviews. March
2016, Vol. 55, Issue March 2016, Pages 591–602

Solar photovoltaic (PV) installations in the United States have been deployed at a rapid pace in recent years, a development that is attributed in significant part to the federal Investment Tax Credit (ITC). Yet, this credit is scheduled to step-down from 30% to 10% at the beginning of 2017 for corporate investors. For a sample of five US states and different segments of the solar industry, we find that the anticipated ITC step-down in 2017 would increase the levelized cost of solar power by a significant margin, raising the specter of a ‘cliff’ for the solar industry. Our analysis identifies and evaluates an alternative phase-down scenario that would reduce the ITC gradually over time and eliminate it completely by 2024. For this alternative phase-down scenario, it is shown that solar PV would remain broadly competitive, provided the solar industry can maintain the pace of cost reductions demonstrated in past years.