On Thursday or Friday the House of Representatives in the USA is expected to vote on a USD-1.15-trillion (EUR 1.06 trillion) spending bill that includes, among other things, an extension of the solar Investment Tax Credit (ITC).
“Although sudden opposition could block immediate approval of the full bill, it looks close to certain that the ITC extension will go ahead,” IHS Technology said in a summary note for the ITC situation on Wednesday.
THE PLAN
The last pages of the omnibus spending bill, released Tuesday night by House Republicans, present a plan to gradually reduce the solar ITC over the coming years, instead of cutting it from 30% to 10% at the end of 2016 for commercial projects.
More specifically, projects that start construction before 2020 will be receiving the current 30% rate. For those entering construction in 2020 and 2021 the rate will decline to 26% and 22%, respectively. All these projects need to be finalised by 2024 to get the respective rates. In 2022, the ITC will fall to 10% for commercial photovoltaic (PV) systems.
For residential installations the tax credit will end in December 2021.
IHS FORECAST CHANGES
The extension of the solar ITC and the changed deadline criteria from “placed in production” to “started construction” will change the US solar market over the coming years. IHS expects that the least advanced projects that are contracted to be concluded by end-2016 would renegotiate deadlines.
Prior to the news of the very likely ITC extension, IHS expected US solar deployment to get close to 17 GW in 2016 and fall to 6.5 GW in 2017. The research firm is now revising these projections. It said, if the ITC gets extended as described in the bill, the USA will install 12 GW to 14 GW in 2016, with 3 GW-5 GW of utility-scale projects left for later. In 2017, the country is expected to see solar installations growing further to 13 GW-16 GW.
IHS projects peaks in solar installs in 2020 and 2023.
The company calculates that the PV project pipeline in the country is now at about 58 GW, including 20 GW with signed power purchase agreements (PPAs). According to initial IHS assessments, the five-year extension of the ITC could spur developers to continue growing the pipeline at the current annual rate of 15 GW.
GLOBAL PICTURE
With an extended ITC, global solar capacity additions are now seen to reach 66 GW-68 GW in 2016 and then expand further to between 70 GW and 73 GW in 2017. This compares to IHS's previous projections for a slowdown after 2016, with a peak of 70 GW in that year and a decline to 63 GW in 2017.
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US solar installs forecast - impact of ITC extension in 2016 and 2017. Source: IHS (www.ihs.com).
