On June 22, members of the House Transportation and Infrastructure Committee approved a massive infrastructure investment package – aptly named the ‘Moving Forward Act’, designed to improve infrastructure in the wake of the coronavirus pandemic.
The Moving Forward Act expands the previously-introduced $500 billion INVEST America highway bill into a comprehensive $1.5 trillion bill, that addresses a myriad of issues, including expanding renewable energy in the US.
The Moving Forward Act seeks to extend the federal solar tax credit, which has been one of the driving forces for solar industry growth. Image source: Grist
Buried deep within the 2,309 page bill is a proposed $70 billion investment in clean energy, which includes an extension of the federal solar tax credit, which is set to expire at the end of 2021.
The federal tax credit is one of the driving forces behind rapid solar growth in the US, as it makes solar more affordable for homeowners. When more people can afford solar, installers have more projects, leading to a healthier and bigger solar industry.
Approval of this bill could greatly change the future of the solar industry – for the better.
What solar provisions are included in the Moving Forward Act?
The Moving Forward Act proposes many different clean energy and technology investments, including:
- Five year extension of the federal tax credit
- Direct pay proposal at 85% of the tax credit amount for qualifying projects
- Storage tax credit
- Proposals to incentivize investment in clean energy for low income and underserved communities
- Tax credits for clean energy manufacturing
- Grid modernization investments
- Funds for transmission planning with a requirement to account for renewable energy generation
- Grant program for solar installation in low-income and underserved communities
- Funds for renewable energy installation in community institutions, such as schools
- Improvements to public lands renewable energy development programs
Let’s take a look at some of these provisions a little more closely.
Federal solar tax credit extension
Perhaps the most important provision included in the Moving Forward Act is the extension of the federal solar tax credit, also known as the investment tax credit (ITC).
The federal tax credit has been a major player in the growth of the solar industry, allowing solar to have an impressive average annual growth rate of 49%. If passed, the Moving Forward Act would extend the federal tax credit for an additional five years.
The new incentive step down schedule would be as follows:
- Restore the federal tax credit to 30% until December 31, 2025
- Step down the tax credit to 26% in 2026
- Step down the tax credit to 22% in 2027
- Set the tax credit expiration date to January 1, 2028
Right now, solar system owners can qualify for a tax credit that’s equal to 26% of the costs of their solar installation. However, the tax credit drops down to 21% in 2021, and expires on January 1, 2022. The starting date of the extension cannot be determined until the bill has been passed.
This step down has solar installers nervous, as they fear less people will be willing to go solar without the tax credit. The approval of this extension could bring installers some peace of mind.
Low income solar grant program
Also included in the Moving Forward Act is a low-income solar grant program. This program would provide grants to properties located in underserved areas to promote solar installations on multifamily housing, Indigenous lands, and at utilities that service underserved areas.
Community solar installations that serve underserved or low income residents also qualify for grants.
Projects that include job training and apprenticeship, and those that are projected to give the biggest financial benefit to system owners and subscribers will be given priority. Between 2021 and 2025, $200,000,000 in grants would be available each year.
Another key component of the Moving Forward Act is investing in grid modernization.
Modernizing the grid would allow for a more seamless integration of renewable energy into our electricity grid. It would also look to incorporate more energy storage for an effective way to become less reliant on fossil fuels.
Part of the grid modernization plan outlined in the Moving Forward Act is to incorporate widespread electric vehicle (EV) charging infrastructure. By providing more access to electric vehicle charging, more people might choose to invest in EVs.
What impact would the Moving Forward Act have on the solar industry?
For the first time in a decade, the solar industry is seeing a decline in jobs and the number of installations as a result of the coronavirus pandemic. If the Moving Forward Act were to be passed into law, it could have a profound impact on the recovery of the solar industry in the post-COVID landscape.
The extension of the federal tax credit would continue to incentivize solar for an additional five years, which would encourage more homeowners to make the switch to solar. This would allow for solar installers to make up for lost revenue due to coronavirus. Once these losses are made up for, the extended tax credit would lead to even further growth of the solar industry.
Also, with the low income grant program encouraging job training and apprenticeship opportunities, the solar industry could recover the 100,000-plus jobs lost in the past three months. It could expand the solar job market into new areas, potentially creating hundreds of thousands of new jobs, as well.
Not only that, but the solar provisions laid out in the plan would make solar more equitable by providing access to solar to low-income and underserved neighborhoods. This will give more people access to clean, reliable energy, as well as reduced energy bills.
Will the Moving Forward Act pass in the Senate?
Despite the fact that over 90% of Americans are in favor of expanding solar energy, the Senate has made it clear that they are not interested in expanding the federal tax credit. Expansions have been proposed and shut down multiple times.
Most recently, Senate democrats attempted to include a solar tax credit extension in the coronavirus relief package, or the CARES Act. The inclusion of the tax credit led to an explosive debate on the Senate floor, prompting Senate majority leader Mitch McConnell to respond to the ITC extension with a rousing “Are you kidding me?”.
The extension was subsequently cut from the stimulus package.
So, although solar energy has support from a vast majority of Americans, and it has been proven time and time again that the transition to solar would be positive for not only the environment, but the nation’s economy, it has consistently been blocked in the Senate.
That’s what makes the chances of the Moving Forward Act actually moving forward a mystery.
Legislators are set to vote on the Act before their July 4 recess.
Moving forward in the solar industry
It’s important to keep in mind that this version of the Moving Forward Act is a starting point for the bill. As of right now, the bill largely has Democratic support, and Republican legislators are likely to call for changes to the bill.
But, the number of solar provisions included in this bill is a great starting point, and a huge success for the industry. Hopefully, at least a few of these proposals will make it through to the final bill.
Even if the solar provisions are removed from the Moving Forward Act, the solar industry is still on track to grow in the long run. Solar Energy Industries Association (SEIA) predicts that in 2023, over 5,000 megawatts of solar will be installed in the US.
That’s more new solar capacity than ever before! But, that number could be even higher with things like an ITC extension and low income solar programs.
To show your support for the Moving Forward Act, and to support other solar policy initiatives, you can sign SEIA’s most recent letter to Congress.