Yesterday, December 21st, 2020, Congress passed a COVID-19 relief bill that contained a stimulus package focused on boosting investment in clean energy development and jobs which included an extension of investment tax credits for solar.
In the provisions of the bill, the current 26% Investment Tax Credit (ITC) offered for solar power projects that begin construction before the end of 2020 will be extended by two years, to continue at 26% through the end of 2022. After 2022 the credit will step down to 22% in 2023 and then will be replaced by a permanent 10% tax credit for commercial solar installations. Prior to the passage of the new bill, this amount would have stepped down to 22% in 2021 and then 10% starting in 2022.
The ITC, also known as the federal solar tax credit, is a dollar-for-dollar reduction in the income taxes that an individual or company would otherwise pay the federal government, allowing you to deduct 26% of the cost of installing a solar energy system from your federal taxes with no cap on the value. C-PACE financing allows commercial property owners access to this lucrative incentive, along with decreased energy costs and other renewable incentives, all with $0 out of pocket.
As a result of extending the solar ITC, the COVID-19 relief bill will likely continue the renewable energy construction boom the country has been seeing over the last few years. It will also likely alleviate the supply, construction, and labor disruptions that developers have felt as a consequence of the pandemic, since it will allow additional time to qualify for the credits. The previous deadline for construction to begin before the end of 2020 had sparked a large increase in investment in renewable energy over the past couple of years. According to a report by BloombergNEF, in 2019 the United States was the second largest investing country in renewable energy, next to China, investing $55.5 billion in renewable energy projects, up 28% from 2018. This significant increase was largely attributed to the incentive to meet the deadline for the 2020 ITC expiration; and 2020 is now poised to surpass 2019’s numbers.
Greenworks lending is excited to continue to play a significant role in lowering the carbon footprint of our commercial buildings and deploying even more clean solar energy in the years to come. Now is the time to take advantage of these solar tax credits and C-PACE can help finance a solar project with 100% upfront, long-term, fixed-rate capital. The financing can also cover roof upgrades or replacements and related installation costs all while providing positive cash flows for building owners from day one.
To learn more about starting a solar project with C-PACE and utilizing the solar ITC, contact Tim Olson, Greenworks Lending’s Associate Director of Solar and Storage.