Extended investment tax credit casts sunny forecast for solar

Budget deal, Paris accord cast sunny forecast for solar

Between the recent climate accord in Paris and a likely deal between Congressional democrats and republicans to extend the solar investment tax credit, the future is looking bright for rooftop solar.

Solar stocks started climbing after more than 250 nations came to a historic agreement this month to take actions aimed at slowing global warming. With the United States standing arm-in-arm with the United Nations at the Paris Climate Change Conference in early December, it’s clear the government will increase its support of renewable energy technologies.

Beyond that, Bill Gates and other billionaires have created an international clean energy fund to help finance research and development. The fund has backing from the United States government, China and many others. India has also formed a solar alliance with support from 120 different countries that will contribute to a fund aimed specifically at financing solar projects in developing countries.

Upon execution of the first global climate accord of its kind, solar stocks surged. But that was nothing compared to this week’s news. SolarCity stock was at a low of $25.07 per share on Nov. 12. On Dec. 14, the Monday after the Paris Climate Conference concluded, the stock was trading at $41.59. On Dec. 16, the morning after congress announced its potential agreement on the investment tax credit, the stock had nearly doubled its November price, trading at $50.93 in late day trading.

Instead of threatening to shut the government down and refusing to sign a new budget agreement, congressional democrats and republicans are in the midst of unprecedented environmental negotiations.

Once it was announced that democrats might agree to end a ban on exporting crude oil from the United States that has been in effect since 1975 in exchange for extending the investment tax credit for solar, solar stocks soared Wednesday.

The tax credit is set to fall from 30 percent to 10 percent in 2016. The extension would maintain the 30 percent tax credit through 2019, stepping down to 26 percent in 2020, 22 percent in 2021 and 10 percent in 2022.

That substantial extension and gradual step down of the tax credit would provide the stability the solar industry has said is necessary to maintain its health. The industry has added thousands of jobs over the last five years and is a growing sector of the US economy. Solar advocates have said the abrupt drop in the tax credit will derail much of the growth the industry has experienced in recent years.

If the tax credit is extended, solar will continue to experience increasing cost competitiveness in the energy industry. As rooftop solar hard and soft costs continue to fall, the tax credit will make rooftop solar an even more financially attractive to home and business owners.