Solar energy tax credit may not be a bad move for the USSeptember 3, 2012
Tax credit a subject of political controversy
Alternative energy is becoming an increasingly political affair. This is particularly the case with solar energy, which has managed to gain a great deal of support over the past few years. Solar energy has established a strong foothold in many parts of the world, where its economic potential is often highlighted. In the U.S., the majority of solar energy projects are supported by the investment tax credit (ITC). The ITC has been a point of controversy amongst politicians because of the possibility that the solar energy projects of the country will not be able to return their investments.
Tax credit provides financial support for solar energy projects
The ITC is meant to provide solar energy projects with the financial support they need to thrive. Currently, the tax credit is at 30% of a project’s total cost. In 2016, this will be reduced to 10% in an attempt to promote profitability amongst the projects supported through the ITC. This initiative is often likened to a form of welfare for alternative energy and is criticized because it does not provide solar energy companies with an incentive to reach profitability. This may not be entirely accurate, however, according to a study from GTM Research.
Study shows that ITC has paved the way for more solar energy projects
GTM Research, a clean energy market analysis firm, has released the latest edition of its U.S. Solar Market Insight study. The study aims to provide insight on the various trends that are influencing the country’s solar energy industry. According to the study, the ITC initiative enabled the Power Purchase Agreement, which accounts for 63% of the residential solar energy installation in California. The ITC has enabled more solar energy projects to take root in California, which is likely to bring about significant returns once these projects reach completion.
Federal government expected to see returns from investments in solar energy
SolarCity, a leading solar energy company, recently released a report titled “Paid in Full: An Analysis of the Return to the Federal Taxpayer for Internal Revenue Code Section 48 Solar Energy Investment Tax Credit (ITC).” According to the report, the solar energy projects supported through the ITC are expected to deliver a 10% internal rate of return to the federal government.