Solar 2021 – Year In Review
Solar On The Rise
Another great year in the solar business, despite projects being plagued by supply chain issues and Covid disrupted permit delays. While our business is not focused on residential solar, the industry as a whole follows similar trends. In 2021, residential solar reached several milestones and extreme weather raised customer interest in home energy storage systems.
During peak wildfire season in California, there was a reported 358% increase in quote requests and an 850% increase in Texas during the ice storm, which caused power outages in February of this year. In our commercial area of solar, we have seen new projects originating from states never before seen as “solar” friendly states, like Michigan, Minnesota, and Pennsylvania – a clear indication of the growing awareness of solar and the customer’s drive to reduce operating costs and positively impact climate change.
https://pv-magazine-usa.com/2021/12/14/u-s-residential-solar-trends-2021/
In the large-scale side of the solar business, the US added 4.8 gigawatts of utility-scale solar in the first half of 2021 – a 15% increase from the first half of 2020, bringing the US to a total of 53.7 GW of total solar capacity (including distributed residential and commercial solar projects). In addition, the US has another 17.4 GW of projects in the construction pipeline to be built over the next few years.
Political Support
We’re also seeing positive support for the renewable industry coming from Washington. The recently enacted $1.2 trillion bipartisan infrastructure bill includes a $550 billion commitment to our infrastructure over the next 5 years. The bill includes funding to improve the nation’s aging electrical grid system that will make it more efficient and easier to interconnect solar projects at all levels, from residential to utility-scale projects.
All eyes are on the Senate’s vote on the $1.75 trillion Build Back Better Act after the House passed the bill on 11/19/2021. The BBBA is another massive spending bill that will be a significant investment to help us deal with the climate crisis.
Tax Incentives
The BBBA includes several incentives for renewable energy development including restoring and extending the production and investment tax credits to their full values and potentially allowing taxpayers to be eligible for a refundable credit as opposed to tax offsets. Called “Direct Pay”, a refundable tax credit will further incentivize the solar market and may allow non-tax paying entities to participate in the refund scheme. The base investment tax credit rate will be 6%, with a bonus of up to 30% if certain prevailing wages, apprenticeships, and US-made materials are used. However, Direct Pay might not be as easy as one would think. The IRS will have 270 days after enactment to craft rules and tax forms that will be necessary to implement the program. Several questions remain on how the IRS will implement such a refundable credit scheme and whether the more traditional non-refundable tax credit procedures will continue to be an easier choice for investors and non-profit customers like ours.
https://www.projectfinance.law/tax-equity-news/direct-pay-ain-t-all-it-s-cracked-up-to-be
While the Senate is running out of time to vote on the bill before the Holiday break, there is growing momentum to see the bill successful before Congress concludes next year.
We will keep a close eye on the proceedings to see whether 2022 will be business as usual, or if we will start crafting a new way to help people utilize solar as an effective tax management strategy.
