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If solar has a record 2016, credit should go to tax breaks

(c) 2016, The Washington Post.

New statistics released last week by the U.S. Energy Information Administration suggest that in the coming year, the booming solar sector will add more new electricity-generating capacity than any other – including natural gas and wind.

The EIA reported that planned energy installations for 2016 include 9.5 gigawatts of utility-scale solar – followed by 8 gigawatts (or 8 billion watts) of natural gas and 6.8 gigawatts of wind. This suggests that solar could lead the competition, because the EIA numbers are only for large or utility-scale solar arrays or farms and do not include fast-growing rooftop solar, which will also surely add several additional gigawatts of capacity in 2016.

In other words, U.S. solar seems poised for not just a record year but perhaps a blowout year. Last year, in contrast, solar set a record with 7.3 gigawatts of total new photovoltaic capacity across residential, commercial and utility-scale installations.

“If actual additions ultimately reflect these plans, 2016 will be the first year in which utility-scale solar additions exceed additions from any other single energy source,” the EIA said in a statement.

Justin Baca, vice president for markets and research at the Solar Energy Industries Association, said he agrees with the EIA’s figures – though the industry group expresses them in direct current vs. alternating current, and so projects a total of 11.8 gigawatts of utility-scale solar photovoltaic installations, a number Baca calls “completely consistent” with the EIA’s. On top of that, meanwhile, the SEIA expects to see an additional 4 gigawatts of residential and commercial solar additions, for more than 15 gigawatts in total, Baca said.

“Solar’s going to be the decisive leader in terms of capacity additions, for 2016,” Baca said.

The reason this is occurring, however, is not a simple reflection of solar’s growing popularity, or its widely agreed-upon role in helping to battle climate change. Rather, it involves that darling of the industry, the 30 percent solar investment tax credit, which was extended late last year for five years, with a gradual phaseout.

Before its recent extension, the credit was set to phase out at the end of 2016. Accordingly, to make sure they captured the credit, a large number of installations had been planned to close by the end of this year.

“For the past eight years, the expectation had been that you were going to get your system done this year, otherwise the cost of the system in 2017 was going to be much higher,” Baca said. Now that the credit will actually not phase out, many of those already planned installations are going ahead on time. “Had the tax credits been extended earlier, people might have relaxed their timelines,” he said.

This logic means that 2017 will not see as many installations as 2016 – but Baca thinks the industry will keep growing and, by 2019, will climb back to 2016’s high.

However, given the extension of the credit, it could be that 2016 actually ends a little lower than it would have otherwise, according to Nathan Serota, a solar industry analyst with Bloomberg New Energy Finance. But he concurs that there should still be a record year. “It’s going to be big,” Serota said. “The floor on 2016 will be over 9 gigawatts,” including all types of solar installations, he said.

Serota says the tax credit extension means there could actually be only a slight difference between 2016 and 2017, if enough projects get pushed off until next year. “2016 is going to be a huge year, and then we’re going to continue to see big years over the next five,” he said. Granted, solar could still face some head winds, particularly from the competition offered by extremely low natural gas prices.

In the grand scheme, the tax credits for solar, as well as an extension of the production tax credit for wind, could serve as a kind of “bridge” into an era in which the Obama administration’s Clean Power Plan is operating – or at least, so the current administration hopes. Granted, that depends on whether that plan survives its current legal challenges.

A recent report from the National Renewable Energy Laboratory found that, due to the tax-credit extensions, the United States will add 53 additional gigawatts of renewable energy capacity by the year 2020.

 

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