New Tax Credits for Solar Power

05/15/2006


With electricity and natural gas prices skyrocketing across the country, 32 members of Congress responded by introducing legislation in the U.S. House and Senate to extend solar energy and fuel cell investment tax credits through 2015, reports the Solar Energy Industries Assoc. The credits are currently set to expire next year.

The SEIA praised Senators Gordon Smith (R-OR) and Robert Menendez (D-NJ), as well as Reps. J.D. Hayworth (R-AZ) and Michael McNulty (D-NY), for sponsoring S. 2677 and H.R. 5206, the "Securing America's Energy Independence Act."

"Solar power is clean, renewable and cost-effective, but it also needs time to develop," said Rep. Hayworth. "New technologies such as solar systems or hybrid cars aren't created overnight. By extending these tax credits we are giving this industry time to grow, branch out and succeed."

 

The Energy Policy Act of 2005 provided a 30% tax credit for photovoltaic systems purchased for both residential and business applications. However, these credits will expire after two years without legislative remedy, a term too short to encourage significant industry growth. A long-term extension is essential to reducing the cost of solar energy, as it would create market conditions that allow solar companies to make investments and drive down costs through economies of scale.

 

The Senate and House bills both include the following provisions:

 

Residential Solar Tax Credit: Extends a 30% tax credit, created in the Energy Policy Act of 2005, for the purchase of residential solar water heating, photovoltaic equipment and fuel cell property. Changes the maximum credit to $2,000 for each kilowatt of capacity for solar equipment and $1,000 for each kilowatt of capacity for fuel cells. Credits may be taken against the alternative minimum tax. Expires after December 31, 2015.

 

Business Solar Tax Credit and Fuel Cell Tax Credit: Extends a 30% business credit, established in the Energy Policy Act of 2005, for the purchase of fuel cell power plants, solar energy property and fiber-optic property used to illuminate the inside of a structure. Credits may be taken against the alternative minimum tax. Expires after December 31, 2015.

Meanwhile, in Canada the solar incentive news was not so good. The Canadian federal budget released last week provided no federal programs for solar electricity, and the Renewable Energy Deployment Initiative (REDI), the only federal program for solar thermal technologies such as solar hot water, is at risk of being cancelled. REDI is a Climate Change program, and all funding for Climate Change programs are frozen until a government review is completed. Funds for REDI have been frozen since March 31, and after the review, Canada’s only solar program may be cancelled.

Previously, the budget for REDI for this fiscal year was set at $5 million. REDI has been crucial in stimulating the sale of solar thermal products in commercial markets in Canada and has significantly helped expand the use of solar energy in Canada. In 2004, annual sales of solar heating grew by over 50%, reaching over 250 MWth in that year. These sales were for Canadian-manufactured products and were installed by Canadian workers.

In other solar news, MIT’s Technology Review online magazine reported on recent technological breakthroughs in solar power. For the full story, click here .





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