The Energy 202: New Trump administration policy a bright spot for solar developers

Source: By Dino Grandoni, Washington Post • Posted: Wednesday, June 27, 2018

Workers from California Green Design install solar electrical panels on the roof of a home in Glendale, Calif. in 2010. (AP Photo/Reed Saxon, File)

Solar energy companies in United States have gotten used to seeing the Trump administration set policy that’s unfavorable to the industry.

But the Internal Revenue Service just gave solar developers a rare reason to be sunny.

On Friday, the IRS issued guidance giving solar developers more opportunities to secure tax breaks, which have already helped boost solar generation nationwide.

At the end of 2015, Congress extended a subsidy called the investment tax credit for solar projects for another five years as part of a broader budget compromise. But lawmakers left it to tax-policy writers at the IRS to define exactly when construction on a solar-panel farm or other projects officially begins.

So last week, the IRS said solar developers can claim the biggest available subsidy — a 30 percent investment tax credit — if they invest at least 5 percent of the total expected cost or start significant physical work on the project before the end of 2019.

As long as the solar power generators are up and running by 2023, they get that big tax break.

The IRS’s decision erases up one of the biggest question marks surrounding the future of U.S. solar installations. The tax breaks were designed to encourage large institutional investors such as Goldman Sachs and Google to finance solar development, but as the investment tax credit begins its phaseout through 2021, financial backers grew leery about putting more money down. Abigail Ross Hopper, head of the lobbying group Solar Energy Industries Association, said the guidance gives “certainty that will help solar project sponsors finance and build more solar.”

The solar industry has already weathered its blows by the Trump administration. “You don’t see the Solar Energy Industries Association say too many complimentary things about the Trump administration these days,” said Dan Reicher, a Stanford Law School professor who specializes in energy finance.

Various plans contemplated or proposed by the Energy Department to bolster financially ailing nuclear and coal-fired power plants threaten to undercut the economic edge of cheaper solar, wind and natural gas.

The latter group of cheaper electricity generators is helping put some coal and nuclear power out of business in the United States. The Federal Energy Regulatory Commission has rejected one proposal to rescue coal and nuclear plants. But President Trump this month ordered Energy Secretary Rick Perry to use Cold War-era emergency powers to prevent their continuing shutdown.

Solar panels have even become fodder in Trump’s budding trade war. This year, Trump imposed a tariff starting at 30 percent on imported solar panels. The tariff relief, sought by panel makers Suniva and SolarWorld, was opposed by much of the domestic U.S. solar industry because it discouraged solar installations by making them more expensive. Reuters reports the tariff led companies to pause or cancel more than $2.5 billion in investments in large-scale installations.

But analysts at Credit Suisse Group point out that the new IRS guidance gives solar developers a path for circumventing that onerous import tax. “The news is positive for utility scale solar developers who can now avoid solar tariffs imposed on imports through 2021, procure the majority of their solar panels in later years, and still qualify for the higher tax credits,” the bank wrote in a note to investors.