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EGEB: Americans, solar tax credits just got a two-year extension

In today’s Electrek Green Energy Brief (EGEB):

  • Considering installing rooftop solar panels? You now have more time to get the current tax credit.
  • Here are some of the big green energy and climate change wins that came out of US Congress.
  • UnderstandSolar is a free service that links you to top-rated solar installers in your region for personalized solar estimates. Tesla now offers price matching, so it’s important to shop for the best quotes. Click here to learn more and get your quotes. — *ad.

Rooftop solar tax credit extension

If you are a US homeowner and are considering installing rooftop solar panels, there’s good news. Congress has extended the current rooftop solar tax credit incentive of 26%, which was about to expire at the end of 2020, for two years.

The solar tax incentive extension was included in a $1.4 trillion omnibus package Congress passed along with the $900 billion COVID relief package. 

Under the federal Investment Tax Credit (ITC) for solar projects, the residential solar tax credit will remain at 26% for 2021 and 2022. The ITC will then drop to 22% for projects that begin construction before the end of 2023.

This extension replaces the old household solar plan that dropped the credit to 22% in 2021 and then to zero after 2021.

Forbes explains how the new plan works in a hypothetical example:

Say you have a contract for a $40,000 16kW LG Solar system for your home in Connecticut. The 26% federal credit would give you $10,400 off, compared to $8,800 off under the 22% credit. That’s an extra $1,600 savings. You get the credit (dollar for dollar) off your income taxes for the year when you install the solar panels, and it’s applied to the cost after state incentives.

The credits are due to fall to 10% for large solar projects and to 0% for small solar projects in 2024. But Ravi Manghani, head of solar research for Wood Mackenzie, said [via GreenTech Media]:

[The bill] provides the industry a full extra year to negotiate longer-term tax credits or tie renewables directly with future carbon policies with the friendly Biden administration.

Green energy wins in Congress

According to analysis from independent research firm Rhodium Group, the US government’s omnibus package saw “the most significant action on climate and energy in over a decade.”

In addition to the above solar tax credits, wind power also got a boost. The package extends the production tax credit and ITC for onshore wind for one year at 60% of the project’s full value, and gives offshore wind projects, for the first time, a 30% ITC for projects that began construction starting January 1, 2017 through December 31, 2025.

Rhodium details other package standouts:

The highest-impact provisions focus on phasing down superwarming hydrofluorocarbons (HFCs) and advancing carbon capture and storage. Over the next 15 years, the HFC phasedown [an 85% cut] will reduce 900 million metric tons (MMt) of carbon dioxide equivalent — more than the total annual emissions of Germany. Over that same period, additional carbon capture projects could reduce as much as 585 million tons — more than the annual emissions of Australia.

The energy package authorizes nearly $40 billion in new research, development and demonstration funding for clean energy. It also overhauls major parts of the Department of Energy’s RD&D programs to focus on a wider array of clean technologies. 

Axios points out that “the cumulative 15-year effect of the HFC and CO2 sequestration credits would more than counteract the impact of two big Trump-era decisions: weakening vehicle emissions standards and rolling back methane rules for the oil-and-gas sector.”

Sam Ricketts, cofounder of the environmental group Evergreen Action, said:

[T]his legislation is a down payment on the clean energy economic recovery that President-elect Biden will realize in full, starting next year.

Biden has made addressing climate change one of his central priorities, but he will face big challenges from the Republicans.

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Avatar for Michelle Lewis Michelle Lewis

Michelle Lewis is a writer and editor on Electrek and an editor on DroneDJ, 9to5Mac, and 9to5Google. She lives in St. Petersburg, Florida. She has previously worked for Fast Company, the Guardian, News Deeply, Time, and others. Message Michelle on Twitter or at Check out her personal blog.