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The U.S. investment tax credit for solar energy: Alternatives to the anticipated 2017 step-down

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  • Comello, Stephen
  • Reichelstein, Stefan

Abstract

Solar photovoltaic (PV) installations in the United States have been deployed at a rapid pace in recent years, a development that is attributed in significant part to the federal Investment Tax Credit (ITC). Yet, this credit is scheduled to step-down from 30% to 10% at the beginning of 2017 for corporate investors. For a sample of five U.S. states and different segments of the solar industry, we find that the anticipated ITC step-down in 2017 would increase the levelized cost of solar power by a significant margin, raising the specter of a ‘cliff’ for the solar industry. Our analysis identifies and evaluates an alternative phase-down scenario that would reduce the ITC gradually over time and eliminate it completely by 2024. For this alternative phase-down scenario, it is shown that solar PV would remain broadly competitive, provided the solar industry can maintain the pace of cost reductions demonstrated in past years.

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  • Comello, Stephen & Reichelstein, Stefan, 2016. "The U.S. investment tax credit for solar energy: Alternatives to the anticipated 2017 step-down," Renewable and Sustainable Energy Reviews, Elsevier, vol. 55(C), pages 591-602.
    • Handle: RePEc:eee:rensus:v:55:y:2016:i:c:p:591-602
    DOI: 10.1016/j.rser.2015.10.108
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