Congress Should Enact New Solar Tax Credits
April 25, 2007
In the early 1980s, the future looked bright for solar energy.
The Carter Administration had published the report A New Prosperity, detailing how emerging technologies and smart policy could together help the US meet 28 percent of its electricity needs from renewable sources by the year 2000. Before he left office, President Carter installed a solar thermal water heater on the roof of the White House, and the government extended federal solar energy tax credits to homeowners so they could do the same.
By the middle of the decade, spurred by the tax credit, solar companies were doing brisk business. For example, the American Solar King company sold solar water heating systems through a mainstream department store (Sears), and reported sales of more than $30 million in 1985.
But then something happened. Under President Reagan, the federal tax credit for homeowners to choose solar energy was abolished. The New Prosperity study was shelved by Reagan’s energy secretary, and even the solar panels on top of the White House were torn down. Without the tax credit to drive business, companies like American Solar King folded and closed up shop.
Today, in 2007, we’re a long way from generating 28 percent of our energy from renewable sources, as envisioned almost 30 years ago. Last year, a slim 2.7 percent of our electricity came from renewables (excluding hydropower), and of that just 0.5 percent came from solar.
Just like 30 years ago, emerging technologies and smart policy can together help the US change its energy mix – but only if we act now to implement better, faster, smarter policies that give the renewable energy industry a boost. In congressional hearings in March, a scientist funded by the US Department of Energy testified that if we do nothing, existing federal policy will barely lift the renewable portion of our current energy mix by even one percent over the next 20 years.
The time is right for Congress to reinstitute robust tax credits and rebuild the market for solar energy that existed 30 years ago.
Right now, legislation introduced in both the House and the Senate is poised to do just that. As introduced in both houses of Congress, the Securing America’s Energy Independence Act greatly increases the available federal tax credits recently established in 2005 for homeowners who choose solar energy. Originally capped in 2005 at $2,000 per solar energy system, the new bills would remove the cap, offering $1,500 per half-kilowatt of energy a system can produce. (A single-family household installing a photovoltaic system of around 5kw would then be eligible for a generous credit of $15,000.)
What’s more, the bills extend the credits’ deadline to the end of 2016, though if Congress fails to act, the original capped credits were set to expire at the end of this year. To spur development in the industry, experts say that long-term credits are key, and that short-term credits like those passed in 2005 create a “boom and bust” effect within industries, triggering demand for only a short time, before the bottom falls out.
If Congress acts, Americans will follow. State level programs have shown that tax incentives are the key, at least for now, to driving demand. States with generous state tax incentive programs lead the nation in solar usage, and states with no incentives trail behind.
Solar energy can be that source of new prosperity the Carter Administration report talked about. With the tax credits, people everywhere will start buying it, and as a result, solar energy will start to achieve better economies of scale, setting off a chain reaction. Prices will come down, and solar can go up everywhere, creating jobs in every community that can’t be outsourced, giving our country a secure, clean source of energy that can help roll back climate change.
We can all start by giving Congress a push, contacting our representatives and voicing support for extending the tax credits, reminding our leaders how solar energy can simultaneously increase our country’s energy security, reduce pollution, fight climate change, create jobs, and stimulate the economy.
Then we can follow through by using the credits and watching a new day dawn on US energy.