Tax Credit Extension Reflects New Political Era for Solar

Before the U.S. Congress retired for the year, lawmakers gave the renewable energy sector a big thumbs-up endorsement and extended the 30% federal tax credit* on renewable energy through 2019, with phased step-downs in subsequent years. 

This is a big win for solar consumers and the solar industry. From my experience, the average NorCal solar system has a payback period* of 6 to 9 years, depending on the customer usage, roof orientation and the amount of solar production the system can generate. Add 30 percent to this payback period, and the solar value proposition would be substantially reduced.  

This is great news for everyone but utilities and carbonites, and it represents how solar has transcended political gridlock in its broad appeal to varied environmental, job creation, free-market and corporate constituencies. More evidence if you needed it that harvesting your energy from the sun makes the most sense, no matter whether your political color is red, blue or green.

Read this interesting account from the blog GreenTech Media for background on how the deal went down.

http://www.greentechmedia.com/articles/read/inside-the-solar-industrys-successful-bid-to-pass-the-investment-tax-credit

* The residential renewable energy tax credit is not a rebate or a write-off, rather a direct one-to-one reduction in a homeowner's tax liability. So it's great if you have a job and not a lot of write-offs, and you pay quite a bit each month from your paycheck towards your end of year tax obligation. If you are retired or on a fixed income, it can be harder to take advantage of the tax credit because you don't have such a large tax obligation. (Lack of enough individual tax liability btw is one great reason many people lease solar instead of purchase.)

* Payback Period is the amount of time it takes for a system to pay for itself, based on the amount of utility electricity offset by the system if you applied the subsequent avoided cost of that electricity to the solar system purchase cost. For accuracy, payback calculations should include an estimate of panel degradation (no panel produces as much electricity Year 25 as Year 1), and an estimate for utility rate escalation (see my 1/5/16 post on 2016 PGE rate increases and trends).