Solar-generated electricity, long decried as too expensive to be practical, may have gotten a little closer to being competitive. The Senate on Tuesday approved its version of a bill that would extend income tax credits for the solar energy industry through 2016.
The Energy Improvement and Extension Act of 2008 would extend the 30% tax credit, which is due to expire at the end of the year, on the upfront cost of solar installations. With the 30% credit, solar energy cells can produce electricity for as little as 20 cents per kilowatt hour on residential rooftops, putting the cost of solar juice on par with grid electricity in states like California, where energy costs are high. The tax credit would be extended for commercial and utility-scale solar energy projects as well.
But the bill still needs approval in the House of Representatives before Congress adjourns next week. The House’s version of the solar legislation is identical to the Senate’s, but other provisions of the House bill, including the elimination of tax credits for fossil fuels, are under debate and could stall the legislation.
“We’re probably 50-50 at this point,” said Rhone Resch, president of the Solar Energy Industries Association, a trade group.
A key provision of the legislation is the removal of a $2,000 cap on the tax credit for residential solar systems. By removing the cap, the average installed price of a 4 kilowatt home solar system would fall from $28,000 to $21,000, and make the solar business less reliant on state subsidies. “You’re going to see national markets open up for residential solar,” Resch said.
SolarCity of Foster City, Calif., has installed nearly 2,000 solar systems over the past two years with the help of the 30% tax credit that became available under the Energy Policy Act of 2005. “Without it, we’re not going to have scale that brings solar to grid parity, and investors aren’t going to be interested,” says Lyndon Rive, head of SolarCity.
Navigant Consulting (nyse: NCI – news – people ) forecasts that 440,000 new jobs in the solar industry would be created over the next eight years if the solar energy income tax credit is renewed. The incentives double new solar capacity to at least 630 megawatts next year. “Congress has a moral obligation to not only bail out Wall Street, but ensure business interests continue to operate in the country,” Resch said.
Congress estimates the extension of credits for solar energy and related clean-generation technologies would cost $2 billion over 10 years.