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Understanding the US Solar Investment Tax Credit and its Impact on Solar Financing Solutions

The Investment Tax Credit (ITC) is a 30 percent tax credit for solar systems on residential and commercial properties that was implemented by the US government in 2006. However, after 2016, the tax credit will be brought down to a mere 10 percent. With rapidly declining solar panel prices, the ITC drop should not impact the viability of future solar financing solutions for solar installations.

The 2008 extension of the residential and commercial solar ITC has helped annual solar installation growth by over 1,600 percent since its implementation in 2006, which is a compound annual growth rate of 76 percent. The government’s goal of extending the ITC until 2016 was to help create a solar market that was price competitive and self -sustaining, with the hopes of lowering costs for consumers. The ITC has been a part in the creation of over 625 manufacturing facilities that produce solar components across 48 states.

The US Solar Market continues to grow

According to GTM Research’s most recent Solar Market Insight report, around 90 percent of the nearly 5,000 MWs of solar capacity installed in the US were built after the ITC was increased to 30 percent during the Bush administration.

The US just recently celebrated reaching 10 gigawatts (GW) of installed solar capacity, with the predictions of reaching 18 GW by 2014.The most recently available Treasury information shows that under the ITC program, there were 44,052 solar projects awarded $2.76 billion.

Surviving the recent set back

Although the ITC program suffered an 8.7% decrease due to US sequestration spending cuts, the US solar industry has continued to grow. Despite the decrease, the US solar market has been able to thrive in part to third-party solar financing options. At SCF, we offer a variety of solar financing solutions to commercial, municipal or non-profit entities looking to install a solar array on their property.

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