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Extending Tax Incentives Just One Bright Move for Solar

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Wind and Solar

At the recent Distributed Sun New Energy Conference in Washington, D.C., Rhone Resch, president and CEO of the Solar Energy Industries Association, spoke of the need to extend the 30% solar investment tax credit (ITC) to help the fledgling solar market achieve price parity with such legacy generation sources as oil, natural gas, and coal. The way the solar market is evolving now, he said, in about five years project costs will fall to the point that subsidies no longer will be necessary.

I wholeheartedly agree, and it might not even take that long. However, price is just one piece of the solar puzzle. The other piece to consider is, what’s going to drive the demand? If someone offers you a really inexpensive car, you might say, “That’s great, but I already have a car.” Similarly, if solar becomes much more cost competitive, utilities that already have power plants may have difficulty justifying the need to invest in even more generation.

Something besides cost reduction is going to be needed to drive utility demand for solar. That, I believe, will come from the Environmental Protection Agency’s announcement in August of the Clean Power Plan initiative and through state renewable portfolio standards and goals that are designed to increase generation of electricity from renewable resources. Approved by some 29 states, these policies generally require investor-owned electric utilities to sell a specific amount or percentage of renewable power.

At a high level, the Clean Power Plan is going to basically drive change in power generation in two ways. First, it will make it more difficult to create new plants that use fossil fuels, and in some cases it likely will lead to the early closure of existing ones. Second, because the generation has to come from somewhere, the natural cleaner generation would come from renewable sources—be it solar, wind, hydro, or perhaps some other source.

The wind and solar industries believe the Clean Power Plan will drive continued demand for solar and wind generation. Both industries have been actively working to drive down costs and boost efficiency. Wind turbines, for example, have gotten bigger and taller with larger swept areas, thus allowing them to be installed in places traditionally considered unsuitable for wind generation. And on the solar side, there’s a constant drive to reduce the cost of the panels, inverters, racking systems, and even the installation labor expense.

Our feeling is that perhaps in as little as a year or two, solar generation could be at parity with most traditional forms of generation, even without tax incentives. And the Clean Power Plan and state renewable-energy goals and standards will only help drive renewable demand and help shift the market to use of cleaner sources of power.

We’d like to know your thoughts. When do you think solar will reach grid parity?


Erik Svanholm

Publication Date

November 12, 2015