The scheduled step down of the federal investment tax credit (ITC) has created some doubt about the future of solar energy in the United States. While solar is more cost competitive than ever, the ITC is still a key driver of solar across the country. In fact, since the ITC was enacted in 2006, the U.S. solar industry has grown by more than 10,000%.
The concern is that incentives from individual states on their own will not make solar economics favorable. Residential solar will be particularly impacted, as the ITC can no longer be applied to solar constructions that start after 2024.
However, two landmark mandates passed in Illinois and New York in the past few weeks have shown that major states remain committed to solar energy and are willing to fill the gap.
In this article, we take a look at policy developments that are expected to shape the solar industry in these two states. For those willing to take a deeper dive, the DG+ team recently released state-level solar market reports, including ones for Illinois and New York.
Experts were fearful that the solar industry in Illinois had experienced what is referred to as a boom and bust. A few years ago, the Illinois General Assembly passed several key legislations that significantly increased the amount of funding available for solar, which in turn led to a record-breaking number of installations across the state. However, in the past year, these incentives had dried up, leaving potential customers and developers confused about whether solar is still a good option in Illinois.
These concerns were resolved this month as the Illinois House passed Senate Bill 2408 (SB 2408), also known as the Climate and Equitable Jobs Act. The bill is expected to significantly boost renewable energy, energy efficiency, and electric vehicle markets, while simultaneously supporting underserved communities. The act specifically supports the solar industry by:
In addition, the small distributed generation category has been expanded to include projects between 10 kW to 25 kW. This means that residential properties with a higher energy profile will receive a more competitive payout schedule. Previously, projects in these categories would receive quarterly payments over a five-year period, but now they will receive one lump sum payment.
In short, the Climate and Equitable Jobs Act will play a crucial role in continued solar energy deployment in Illinois, with or without the ITC. It also means thousands of local jobs, and a cleaner, greener Illinois.
Similar to Illinois, New York State has also passed strong climate legislation in the past few years and implemented robust solar incentive programs that ran out sooner than expected.
NY-Sun provides solar incentives for residential and non-residential entities in the state. The incentives are distributed on a megawatt (MW) block basis, meaning specific incremental MW targets are allocated to specific regions across New York. While the original scope of the program was meant to continue until the mid-2020s, due to the program’s popularity, many incentive blocks have already been filled up.
This month, New York’s new governor, Kathy Hochul, doubled the state’s solar energy goal and increased the level of available incentives for NY-Sun. New York is now aiming for 10 gigawatts (GW) of installed solar capacity by 2030 —a raise from its original goal of achieving 6 GW by 2025.
Governor Hochul has called on the New York State Energy Research and Development Authority (NYSERDA) and the New York State Department of Public Service (DPS) to develop a roadmap on how the state can achieve its bold solar targets. The announcement has also made it clear that 35% of the incentives going forward will be allocated towards low-and-moderate-income (LMI) households. Both agencies must have a draft of the roadmap available for public comment by early 2022.
According to the Governor’s Office, expanding the program is part of the state’s COVID-19 recovery plan, as it will create an additional 6,000 solar jobs. It is also estimated that 1.7 million households can benefit from solar energy with the expansion of the NY-Sun program.
In addition to expanding the NY-Sun initiative, Governor Hochul has announced that New York State is awarding two major energy infrastructure contracts that will aid in delivering more clean energy to New York City—which still gets a significant portion of its electricity from fossil fuels. Clean Path New York is expected to be operational by 2027 and will span 174 miles between Delaware County and Queens, while Champlain Hudson Power Express is expected to deliver electricity by 2025, and will run 339 miles, all the way from Montreal, Canada to Queens.
Both announcements received praise from environmental, industry, and consumer groups, assuring the public that New York remains committed to promoting solar energy.
States and the federal government must align on supporting solar energy in order to successfully move the needle on adoption faster. It is not one or the other, but both are required to have a major impact.
The good news is that there is still hope that the ITC will be extended. In August, the US Senate passed a landmark bipartisan $1.2 trillion infrastructure bill that allocates $73 billion towards grid modernization and $7.5 billion to support the electric vehicle industry. But discussion has quickly moved towards a secondary infrastructure package that some politicians believe should include more funding for solar. A letter co-signed by more than 180 members of congress called on officials to establish a long-term extension for the ITC. If passed, it would also incentivize the manufacturing of solar wafers, cells, and modules in the U.S.
DG+ recently launched a suite of clean energy market products, including ten state-level solar reports that dive into current events, opportunities and challenges, policy summaries, pricing analysis, and market share data. For more information on available market research reports, including Illinois and New York visit our product page.
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