In case you missed it, right at the end of 2020, the U.S. Congress gave a significant gift to every commercial entity considering solar: they passed a multi-year extension of the solar investment tax credit (ITC). And in that one move, gave many businesses, farms, manufacturing plants, distribution centers, rural electric cooperatives, and others one big reason to make the move to renewable solar power. Here’s exactly what went down.
First, a little background. The ITC is a 26% tax credit for solar systems on commercial properties. (It also applies to home solar projects.) The commercial credit can be applied to both customer-sited commercial solar systems and large-scale utility solar farms. The tax credit is given on the cost and installation of the solar equipment and is realized by the business that installs, develops and/or finances the solar project.
This tax credit has achieved what it set out to do in terms of encouraging solar adoption. Since the ITC was implemented in 2006, the U.S. solar industry has grown by more than 10,000%. Two things make the extension of the solar ITC extremely beneficial:
- It provides market certainty for companies wanting to move to solar as well as to solar investors who partner with commercial and government entities like schools on Power Purchasing Agreements. Learn more about that here.
- It preserves the 26% tax credit for commercial solar projects begun in 2021 and 2022. In 2023, the ITC drops to 22%, which is still very attractive. In 2024 and beyond, the ITC goes to 10%.
From the Solential perspective, the ITC has proven to be one of the most important federal policies for the commercial solar industry and for incentivizing clean energy in the United States. Customers we’ve worked with across the Midwest that were on the fence finally made the move because the tax credit is like getting a discount on upfront costs. So I am personally very excited that the 26% tax credit is on the table for the next two years.
Now, as we move forward into the new year, the spotlight on clean energy is brighter than ever. Equipment prices continue to drop. Energy savings are real. And the tax credit is here to stay for the next couple of years. If you’re interested in learning more about commercial solar, the benefits for your business and community and how to finance your system, I’m happy to talk with you. Here’s how to connect: email@example.com and 317-627-4530.