US Solar Reliant Upon ITC Extension For Future Growth

Failure to extend the US Investment Tax Credit will produce a major solar industry downturn in 2017, according to a new report from Bloomberg New Energy Finance.

The new report, commissioned by the US Solar Energy Industries Association (SEIA) and conducted by Bloomberg New Energy Finance (BNEF), analyzed the impact of the Investment Tax Credit (ITC) on the US solar industry, and what the industry stands to lose if the US Government allows the ITC to expire on schedule in 2016.

As it currently stands, the ITC is set to drop from 30% to 10% for commercial systems and zero for residential systems by the end of 2016. Unsurprisingly, if the ITC is not extended or made permanent, BNEF predicts “a sharp drop in industry activity in 2017” — a sharp drop that will significantly and detrimentally impact the following five years.

The planned expiration of the ITC will mean big development in 2016, as developers hurry to complete projects by the end of the ITC deadline. In the wake of the ITC expiration, however, BNEF predicts a drop in the solar project pipeline of around 8 GW, not only bringing new solar installation activity to its lowest level since 2012, but having a trickle-on impact on the following five years (as seen in the chart above).

Conversely, BNEF also looked at the impact on the solar industry if the ITC is maintained at its current level of 30%.

“With a proposed five-year federal ITC extension, we anticipate an additional 22 GW of solar will get built by 2022,” Bloomberg analyst Madeline Yozwiak said. “Without it, we still anticipate solar growth in the next decade, but it will be a much rockier ride.”

Specifically, according to BNEF, “A five-year extension of the 30% ITC would add over 22 GW to the US solar PV install base, boosting average build rate to 10 GW/year from 2017-22.”

Over 2,000 organizations representing “millions of individuals, employees, businesses of all sizes, community development organizations, and non-profit organizations” signed a letter last week, imploring the US Senate and House of Representatives to “act immediately on a seamless, multiyear or permanent extension of the expired and expiring tax provisions” — which includes (PDF) the Investment Tax Credit, as well as the Production Tax Credit responsible for the US wind industry’s continued growth.