Cost of Solar in LI, NYC, & US to Increase if Federal Tax Incentive Expires
On Janaury 1, 2017, the cost of solar in Long Island, NYC, and the US is scheduled to sky rocket by 30% unless critical tax incentive, The Federal Investment Tax Credit 26 USC § 25D , is renewed, extended, or modified by its deadline. This will make going solar all but impossible and can decimate the industry.
Currently, the cost of solar in Long Island, NYC, and the US is made affordable through a combination of incentives which include:
Utility Solar Rebates:
- NY Sun Initiative -Long Island and NYC Solar Rebate Program – NY SUN
- Federal Tax Credit: 26 USC § 25D
- NYS Tax Credit: Residential NYS Tax Credit
- Property Tax Abatement (NYC Only) – Property Tax Abatement
When combining all of the tax credits above, the cost of a solar particularly in Long Island and NYC, is reduced by about 40-60%. The problem is that out of the entire 40-60% reduction, the Federal Tax Credit represents 30%. Without the Federal Tax Credit, the primary benefits of going solar will no longer be available to the general public. Current incentives make a solar investment ROI between 4-7 years. Without the Federal Investment Tax Credit, ROI for Solar in Long Island and NYC can be pushed out to 15-20 years. No one is going to want to go solar with a 15 year ROI.
The purpose of the Federal Investment Tax Credit
The purpose of the Federal Investment Tax Credit, as founded in 2005, is to give the industry time to achieve high growth and efficiency such that it will no longer be required once such efficiencies have been reached. It was originally set to expire at the end of 2006 but it was extended and broadened multiple times because it created billions of dollars of investment and thousands of new jobs.
Although the cost of solar has come down by 100 fold since 1977, the industry despite coming really close to its objective is not ready to take off the training wheels. Conservative estimates state that solar systems with the Federal Investment Tax Credit needs another 4-6 years before the industry can stand on its own. With so much on the horizon (pun intended) and so much completed, thousands of politicians have come together to put forth a bill.
Last month, a group of prominent democrats drafted a bill called the American Energy Innovation Act
The bill would not only extend the Federal Investment Tax Credit but it will also create an alternate option for investment called the Production Tax Credit. This would allow the cost of solar in Long Island, NYC and the US to continue its downward trajectory and ultimately independence from subsidies. Although the American Energy Innovation act promises millions of dollars of investment, research and funding needed to continue the trajectory of solar energy, it faces tremendous opposition from a congress unconvinced of the benefits of Renewable Energy. According to GovTrack, the bill only has a 32% chance of enactment. Today it is what is, only a bill, despite all the hype.
Lack of legislative momentum by congress on the Federal Investment Tax Credit means action needs to be taken by the citizens of Long Island and NYC if they want to save money with solar.
Customers should be calling their local solar contractors to get pricing and to evaluate various financing and leasing options. With every oncoming month where congress does not act, reliable installers’ calendars and installation schedules will fill up. At saturation, installers will need to increase the cost of solar in Long Island and NYC to satisfy the demand. Solar Customers should be signing their commitments at the latest in February. Anything later could risk not making the deadline of January 1, 2017. Current law requires systems to be fully installed in the year that the customer wants to take the credits. Customers in Long Island and NYC should make sure to sign up with a company who they feel will be in business post 2017 in the event that congress does not act and forces many “solar-only” companies. Solar-Only companies are those which exclusively sell solar and have the greatest chances of default post 2017.