The new budget bill has recently passed the house, and is headed to the senate for approval. With this new bill comes the potential to remove one of the tentpole solar incentive initiatives, the solar investment tax credit. Given that the bill is likely to pass, even with some amendments or adjustments, we could very well see the solar tax credit end a full seven years before it was supposed to, and while the core value of solar would remain strong, this would certainly be a step away from making solar more accessible to more people. Let’s take a look at the budget bill which is threatening to upend the solar landscape, and discuss potential solutions for you to keep in mind.
We’ve known for some time that the current administration had plans for dismantling the green energy initiatives that made the Inflation Reduction Act such a powerful and popular piece of legislation, and now we have confirmation of what their plan is for the solar incentive tax credit, and when we can expect to see these changes take place. As predicted, the amendments to the act are coming in the form of a new budget bill, which, if it passes the House and the Senate, will significantly reduce the potency of the tax credit, not to mention the truncation of the credit’s availability.
Originally, the Inflation Reduction Act renewed and extended the tax credit, taking it to a 30% credit with a lifespan of 10 years. This should have carried us through to 2032, but under the new proposal, the availability of this tentpole solar incentive has been dramatically reduced. Namely, there are now two new deadlines to keep in mind, with the first being the most egregious.
Understanding the Budget Bill
Construction on new solar projects must begin within 60 days of the bill’s enactment, which means a very narrow window of time will kick off the moment this bill is put into practice. This effectively cuts the lifespan of this powerful clean energy legislation in half, and that’s not the end of the proposed changes. The secondary deadline is December 31st, 2028, the date by which every initiated solar construction project must be operational. Beyond these changes, there are also new limitations on who can benefit from the solar tax credit, now known as the Production Tax Credit (PTC) and the Investment Tax Credit (ITC).
Ultimately, the value of a solar + storage system can be broken into layers, starting from the core of an initial installation and radiating out with additional benefits. This is important to understand because it provides perspective on just what an impact this new budget bill will have on the value proposition of investing in solar. At its core, a solar installation will save you money due to the outrageous energy rates that California ratepayers have to deal with. If no other incentive were included along with your installation, this would still be a net positive investment. Energy rates are out of control, and show no sign of tapering off in the future, so your ability to reduce your monthly bill with a solar installation is critical.
Beyond this, you have the layers – reliability, security, home value, and incentives. On the reliability front, your system provides you with a monthly energy bill that is far more predictable than your standard erratic energy bill, allowing you to more easily budget your finances. It also protects your home from outages, enabling you to keep the lights on and your important devices powered in the event of a blackout or other disruption of service. Then there’s the fact that the value of your home or property goes up by 4-6 thousand dollars for each kW of solar generation you install, creating a nice nest egg for you should you decide to sell your home.
Ultimately, the new budget bill is a disappointing step back from the kinds of clean energy policies we should be encouraging, and it will make solar less accessible for those who would have otherwise really benefitted from it. Energy bills are the real energy crisis that deserves our attention, not solar incentives. With that being said, the value of solar remains strong, and we will continue to fight for better solar incentives to push us towards a brighter future. In the meantime, if you haven’t made the switch yet, we’d recommend doing so before this new budget bill upends the industry – our expert consultants are ready to help.
