Clean Energy Industry Gets a Big Holiday Gift In Spending Bill

December 18, 2015, 6:30 PM UTC
TO GO WITH "Spain-energy-alternative-wind-solar" View of solar panels facing a solar tower taken in Sanlucar La Mayor on April 15, 2011. Spanish energy company Abengoa built in 2007the first two solar power towers in the world to commercially generate electricity and deliver it to the power grid. AFP PHOTO / CRISTINA QUICLER (Photo credit should read CRISTINA QUICLER/AFP/Getty Images)
Photograph by Cristina Quicler — AFP/Getty Images

Congress passed a major spending bill on Friday that includes important tax credits for clean energy companies that they have called crucial to the continued adoption of solar and wind power in the U.S.

The so-called investment tax credit, or ITC, gives solar companies a 30% tax credit on the price of a solar system. The credits had been scheduled to begin to decline to 10% starting in 2017 under the theory that the markets had matured enough that they no longer required the credits.

But with the extension, the tax credit will be good through 2019. At that point, it would gradually be reduced to 10% by 2022.

President Obama is expected to sign the bill imminently.

Analysts with GTM Research said that the extension of the ITC would increase solar installations in the U.S. by 54% through 2020, and deliver another 25 gigawatts of additional solar capacity over the next five years. For comparison’s sake, there are about 25 gigawatts of solar already installed in the U.S., which can provide enough power for about 5 million average homes.

The extension will likely have the largest impact on the solar projects built to sell solar power to utilities, says GTM Research. The ITC extension will increase these utility solar projects by 73% through 2020.

Without the extensions, researchers with Bloomberg New Energy Finance said that wind companies would install about 25 gigawatts of new wind farms in the U.S. from now until 2021. But with the extension, there will be almost double that amount, or 44 gigawatts installed, over the next six years.

Likewise, with the tax incentive extension, Bloomberg New Energy Finance projected that there would be 59 gigawatts of new solar projects built between 2016 and 2021 in the U.S . Without it, there would be 41 gigawatts of new solar projects.

Solar companies, which have been lobbying heavily for the extension, applauded the deal. Solar pioneer and energy investor Jigar Shah wrote that the legislation shows how the solar industry has been able to establish itself as “the dominant player that is able to negotiate on behalf of the entire renewable energy industry – including wind power.” Shah said that the extensions “will certainly ensure the death of coal.”

To learn more about the economics of clean energy watch this Fortune video:


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