Dec. 28 update: The President has passed the federal spending package and all solar aspects are still intact.
Extended renewable energy tax credits have been included in a $1.4 trillion federal spending package alongside a $900 billion COVID-19 virus relief spending bill. The solar investment tax credit (ITC), which was scheduled to drop from 26% to 22% in 2021, will stay at 26% for two more years. The wind industry also received a limited extension of its production tax credit.
This means that solar projects in all market segments — residential, commercial, industrial, utility-scale — that begin construction in 2021 and 2022 will still be able to receive a tax credit at 26%. All markets will drop to a 22% tax credit in 2023, and the residential market will drop to 0% while the commercial and utility markets will sit at a permanent 10% credit beginning in 2024.
An extension of the ITC has seen support from many outside the industry, including congressional leaders and a group of bipartisan mayors. Various bills have been introduced in the last few years attempting to extend the solar ITC, but nothing has stuck. While there have been attempts to get an investment credit for energy storage installations, nothing involving batteries was included in this spending package.
“We are heartened to see Congress step up to provide Americans with some relief after our country has been mired in a public health and economic disaster,” said Abigail Ross Hopper, president and CEO of SEIA. “This pandemic has taken an immeasurable toll on American families, and our deepest sympathies are with those who have lost loved ones and those who are suffering economically because of the ongoing crisis. Over the next few years, we have an opportunity to build a stronger, more reliable, and more equitable American energy economy, and the action Congress is taking today is a helpful down payment.”
Some energy storage language was included in the spending and relief package. The Better Energy Storage Technology (BEST) Act authorizes $1 billion over five years for federal investments into energy storage R&D.
Comments from Energy Storage Association CEO Kelly Speakes-Backman:
“In addition to elevating energy storage as a top, cross-functional R&D priority of U.S. Department of Energy, the BEST Act establishes a new competitive grant program for states, utilities and private companies to deploy energy storage in a variety of applications. This demonstration program advances storage technology innovation and grid operations and sets the foundation for future storage deployments to protect our electric infrastructure against disruption as it enables a zero-carbon energy supply mix. We look forward to working with DOE and Congress to ensure this important program is fully funded and operates effectively.
“The inclusion of the Better Energy Storage Technology (BEST) Act as part of the year-end spending and relief package is further proof of the bipartisan, bicameral support for energy storage to improve grid reliability and flexibility.”
retired, ss only income, taxes not due, will solar credit be sent as cash refund?????
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Hi Kelly,
I contacted H&R Block and the rep stated anytime you add additional panels or more batteries you can claim those as they are new install and equipment.
Do you have a source for your assertion that it can only be claimed on the original install only and not there after with new additions?
Thanks
Your tax professional would know best.
I have a Generac standby generator running on propane for power outages. Can a solar system be installed with battery storage along with my standby generator. I realize that the battery storage can provide some power if there is an grid outage. Also if my generator is running power outage could the energy generated be stored in the batteries?
I have never used the 26%aITC tax credit since swell energy installed it. About 3 years van I deduct now on 2020 ta yes?
Yes. You have up to 5 years to claim the tax credit.
Since my boat qualifies as a second home, I’m assuming the credit is applicable there. What can I deduct besides the cost of the panels themselves? Controller? Arch to mount the panels to? Batteries to store the energy? Cables for the batteries?
I don’t believe you can use the credit on a ‘second home.’ IRS language from 2013 states: “[We] require qualified energy efficiency improvements and residential energy property to be installed in or on a dwelling unit owned and used by the taxpayer as the taxpayer’s principal residence.” Please talk with a tax professional.
the entire sysstem
Hi Kelly, can the 26% tax credit this year apply to a second residence, like an RV?
Appreciate your feedback.
Thank you
I don’t believe you can use the credit on a ‘second home.’ IRS language from 2013 states: “[We] require qualified energy efficiency improvements and residential energy property to be installed in or on a dwelling unit owned and used by the taxpayer as the taxpayer’s principal residence.” Please talk with a tax professional.
The last sentence in the instructions on IRS Form 5695 for “Qualified Solar Electric Property Costs” states the home does not have to be your main home. It has the same language for solar water heaters, wind and geo thermal.
See link provided https://www.irs.gov/instructions/i5695.
Solar paid for itself in less than 7 years for us in california, because of high electricity prices, and because of a rather generous EV-A time of use rate plan that allowed to charge the cars at night at 12 cents per kWh while getting 24 and 48 cents per kWh at mid and full peak in the day when solar was producing the most. We overspecced our solar system at 10kW intentionally back in 2015 when we replaced the first gas car with electric since we knew that eventually both would be. Which was sooner than anticipated already in 2016. Now we have been booted off of the generous EV-A plan onto a much less generous EV2-A plan, which means more of the solar production is counted as off-peak. Thankfully this March we were able to afford three powerwalls to back the system and instead of donating that electricity at off-peak, we now store it and use it at mid and full peak, essentially we are off the grid from 3pm to midnight.
Thanks for that insight, with a lot of electric utilities folks say in the plains states are still clinging to their old fossil fueled generation plants. Sooner than later they too will be effected by “stranded asset” rate cases. The move right now seems to be decommission coal and add natural gas turbines to make up the difference. As solar PV and wind generation comes online, there will be a point where energy storage will kill natural gas turbines as Peaker plants, again rate cases filed to raise electricity rates to recover “stranded assets”.
As more individuals and even community solar PV is installed, the utilities will come up with more rate spiking electric plans. An example in California TOU is the rate spiking plan just after the solar PV peak generation portion of the day, usually from 4 PM to 9 PM daily. In the plains states TOU is lower rates from say 11 PM to 6 AM considered off peak. The justification in these areas is to try and push folks to use electricity late at night and early morning hours. In a work-a-day World most folks can’t (just) curtail usage or start usage in these time frames. The nice thing about energy storage is the ability to program the unit to store energy and time shift to latter in the day and evening hours or one can charge the battery pack in off peak hours and use this energy in early morning hours before solar PV starts making good power.
As we have witnessed in California, even areas with almost 25% solar PV and wind generation has not brought down electricity costs. The IOU utilities find times of day and programs to spike rates to recover their “lost revenues”. Being able to program around this “game plan” will become more cost critical as the years pass.
Clarifications, please: The article refers to projects that “…begin construction in 2021 or 2022….”. The original credit language referred to “placed in service” (meaning operational). Which is it? Also, the DOE guidance specifically says that the cost can include storage devices that are fed from the solar system, but posts on this site bemoan that there is nothing for batteries. Which is it?
Projects must begin construction in 2021 and 2022 and be fully completed by 2025 to receive the 26% credit. And there was no storage language included in the 2020 update to the ITC. We posted how a storage system can take advantage of the ITC here: https://www.solarpowerworldonline.com/2019/04/how-a-battery-can-be-eligible-for-the-itc-today-and-possibly-in-the-future/
If I have 6 Kw system now and add another 2-3Kw in 2022, would I be able to second federal tax credit in 2022 tax return or it can be claimed only once?
Thanks
Can only be claimed once.
Hi, further clarification, if you took the credit on your system in the past and add new panels I assume you can apply for the credit on the new panels correct?
The tax credit can only be claimed once on initial installations, but please talk to a tax professional.
Hi Kelly,
I contacted H&R Block and the rep stated anytime you add additional panels or more batteries you can claim those as they are new install and equipment.
Do you have a source for your assertion that it can only be claimed on the original install only and not there after with new additions?
Thanks
Hi Kelly,
Just to clarify this extension also applied to Tesla batteries correct?
If the batteries are installed with a solar system
Tesla told me this since my install is in January. This is the first article that came up when searching to verify. This is great news for sustainable energy! Thanks Kelly Pickerel.
To confirm, since the stimulus package has been signed, the ITC has been extended 2021 & 2022?
Yes, as it says in the article.
Wasn’t this the thing that got the veto? Is this still in effect?
The ITC extension is still in effect. Everything in the above story is factual.
Solid research, Kelly! thanks for sharing the relevant section of the bill. I was initially concerned the extension applied to commercial projects only. But, Section 25D references residential projects… Great news for a lot of my clients:-)
Signed last night I believe, correct?
Yes
It’s Signed!!!!
How do you sell “Solar” to a customer that does not have any Fed Tax due, ie older folks on SS?
How do you spend your SS check? Spending money on monthly electric bills, if the answer is, “It’s not that much” then you don’t need that much solar PV on your roof. We’ll see if the Trump imposed solar PV tariffs will be removed by the stroke of a pen or will they be allowed to “run out”? Money to pay for groceries or homeowner’s insurance or Medicare supplemental insurance would be better than a regular electric bill. There are still energy efficiency programs funded by the local utility that might actually have a decent one time subsidy for the installed A.C. output of a solar PV system on one’s roof. http://www.dsireusa.org has programs by State or zip code, see what’s available to you.
and Larry White) Some questions questions to ask yourself when considering solar are: “Have I tightened up my house as much as I reasonably can?” Also, “How soon will my roof need to be replaced?” And “Do I plan any renovations or additions that would affect the placement of panels?” After answering those questions, then consider solar. There are some economies of scale for larger systems (e.g. parts and labor for one inverter plus 6 panels vs. one inverter plus 30 panels). While one reason for going solar is “It’s the right thing to do”, the incentives often work well enough for it to be a pure business decision. Because we had designed and owned a passive solar house before, we were well versed in the techniques of passive solar, so we “picked the low hanging fruit” when designing/building this house so that it would be efficient and ready for rooftop solar when the business case made sense. We are at or near net zero (depends on the year) with a 22-panel system.
Everyone’s situation is different. Here’s ours. We have Traditional IRAs that can be converted to Roth IRAs to generate taxable income. Each November when the tax software comes out for the year you are in, we buy it and run “scenarios” to help us decide how much to convert in that year. Since we can carry forward the solar credit for five tax years total (we started in 2018, can spread it through 2022), we try to convert enough Traditional IRA money to use up approximately one-fifth of the credit each year while keeping our AGI down, since the taxability of SS is linked to AGI. Doing this well is like threading a needle. It’s true–solar is a tough sell to someone who cannot generate taxable income, and who may not live in their house long enough to benefit from the payback (we were both around 70 at the time of install). The lenders here (MN) don’t have much experience with solar so they don’t know how to appraise a house with solar. We replaced our expired HELOC with a new one in January 2020 and the appraiser gave $0 valuation to our system even though it is well integrated visually and had a performance track record by then, so there is no real evidence that solar increases property value (our decision to go solar took incentives into account but ignored any potential value increase). The best overall suggestion? If someone older is interested, give them the information about your product and current incentives, suggest they consult their financial advisor for strategies on how to make your solar numbers work for their specific financial situation, and follow up in a timely manner. Solar is a commitment; it’s not for everyone.
Really need to update this headline with a “Maybe…”
This administration is as squared away as a soup sandwich.
Has Trump signed this bill into law?
Thought it was a sure thing, but no, he has not yet.
This is great news! Hopefully this will stimulate the solar industry even more and come out of this pandemic even stronger than before!
Thanks for that, there have been some comments that section 25 covering the residential sector was not included in this bill.
““This pandemic has taken an immeasurable toll on American families, and our deepest sympathies are with those who have lost loved ones and those who are suffering economically because of the ongoing crisis.””
Sounds like she thinks it’s almost over. We have a surge in Covid-19 infections, more deaths per day from Covid-19 every day than the 9/11 twin towers terror attack and a prediction that IF people don’t start wearing masks, social distancing, keep demanding spending Christmas with extended groups, then what happens with New Years Eve? Going to go out to a Sovereign Indian Nation Casino and ring in the new year like one did last year? We’ve already got a prediction of 500K deaths by summer, the Governments on track to save $6.7 billion a year on those who have paid into the Social Security system and either will stop collecting or will never collect. Culling the herd is no where near over World wide.
You are definitely on point SolarMan. To stick to the topic, it’s great to see that the extension is for another 2 years which is amazing for people looking to install solar panels. However, I do agree we need to start taking Covid-19 infections a lot more seriously.
With my solar panel company in California, we take extreme measures to make sure everyone is feeling fine, not covid positive, 6 feet away, and is wearing a mask at all times. If we can take the necessary steps to prevent infections, I think almost every person and company can as well.
My fear is some of the travel bans from foreign countries will be lifted and a new wave of infection will pervade. Like recently there seems to be another strain of Covid-19 found in England and Africa. I believe that we all will be dealing with infection statistics, distancing, masks, gloves and sanitizing living quarters regularly for the next couple of years.
A new normal, while science tries to iron out this pandemic wrinkle.