Beyond 2016: The Solar Industry and the Step-down of the Federal Investment Tax Credit

Current legislation stipulates that the federal Investment Tax Credit (ITC) for solar installations will be reduced from its current 30% rate to 10% on January 1, 2017 for commercial and utility scale solar power systems. Since its inception, the solar ITC has been a significant federal mechanism to spur rapid growth in the deployment of solar installations. In conjunction with the depreciation tax shield provided through the Modified Accelerated Cost-Reduction System (MACRS), the ITC has played a significant role in promoting new investments in solar installations and in manufacturing capacity for solar systems, including panels and electric systems.

The purpose of this project is to (i) forecast solar PV industry dynamics—both upstream (solar panel manufacturing) and downstream (solar PV installations), (ii) analyze the impacts on the cost competitiveness of the solar PV market prior to and beyond the ITC phase-out, and (iii) provide a set of policy recommendations – including alternative incentive mechanisms ­– regarding the magnitude and timing of the ITC phase-out.

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