Recent changes in national energy policy are making big waves in the energy industry. The passing of an extension of our country’s Investment Tax Credit (ITC) is considered to be a major victory for solar companies and investors in solar power. Today’s article will provide an overview of the Solar Tax Credit and discuss the overall implications of this decision for the energy industry as a whole.

What is the Investment Tax Credit?

The ITC provides a nice incentive for owners of solar power assets (from large-scale commercial facilities to small-scale residential installations) amounting to 30 percent of their investment in the project. The incentive was originally mandated back in 2005 in order to give a boost to funding (both public and private) of renewable energy. The tax credit provided a dollar-for-dollar reduction in a company or homeowner’s income taxes. These federal tax credits were originally set to be reduced to a 10 percent credit by the end of 2016, but they have now officially been extended at a rate of 30 percent for an additional five years.

Why Was it Extended?

Interestingly, this is not the first time the 30 percent ITC has been extended. In fact, the first extension of this investment in renewable energy dates back as early as 2006. The reasons for the extension are varied; however, the growing public and commercial interest in renewable energy is likely chief among the key points that decided in favor of extending the program. With this five-year extension, the ITC is expected to result in more than $125 billion in new private-sector investment in the national energy industry (and therefore in the U.S. economy at large). Solar capacity in the U.S. is expected to triple by 2022.

How Will This Impact the Industry

It’s pretty clear that the extension of this program will have a significant impact. As described above, the extension of this tax credit will give a substantial financial boost to the American energy market. The Solar Energy Industries Association (SEIA) estimates that the extension of this tax credit will help to increase solar installations by more than 50 percent through 2020, which is enough energy to power 19 million homes across the country. That increase in solar energy would account for 3.5 percent of electricity generation in the U.S., formerly as low as 0.1 percent as of 2010. The shift in market focus to renewable energy is estimated to offset 100 million metric tons of CO2 every year. That’s the equivalent of removing 26 coal-fired power plants from the grid.

It is clear that there is a growing national emphasis on the growth of renewable energy in the market. The cost of investing in solar energy has dropped by as much as 80 percent in recent years, and developers and homeowners alike are beginning to see the advantages of solar power. It’s clear that the energy market is shifting toward more clean and renewable forms of power. It will certainly be interesting to see where the industry goes from here.

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