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The 2021 Federal Solar Tax Credit Step Down

November 16, 2020Solaris National
house with solar panels on roof and a red tree in front

The U.S. Federal Solar Investment Tax Credit (or the Solar ITC) was slated to be reduced at the end of last year.

But we all were able to breathe a sigh of relief when the federal government decided to extend the 26% credit for another two years. Well, at this writing, we are about halfway through that 2-year extension, and we can see the tremendous benefit the ITC has had on the industry.

We have seen a significant increase in the number of residential solar installations across the country. However, the history of the ITC has been relatively short when you consider that solar panels hit the market way back in the 1950s. The tax credit started in 2006 and provided a rebate of 30% to homeowners who decided to go solar. That meant that homeowners who invested in solar could deduct 30% of the cost of the system from their federal taxes. The percent that homeowners could deduct from their taxes stayed at 30% for the next 14 years. Then, in 2020, the government reduced it to 26% - where it remains now.

Congress had planned to lower the rate to 22% at the end of last year. However, they decided to maintain the 26%, further promoting the technology. That strategy seems to have worked. The industry has never seen such activity and growth as it has during this year. The program’s original design was to promote residential solar technology and increase installations so the industry could get a foothold and prices would decrease.

Congress voting to support the solar industry by paying for almost a third of the cost of new installations for 14 years seems to have had the intended result. Prices have indeed decreased, and technology has advanced more than was expected. Both of these things happened, which is why we are seeing a payback period of an average of 7 years on solar investment for homeowners. The payback period is the number of years it takes to pay for the panels only using the savings in electricity costs.

The federal government solar program planned to make grid-tied systems affordable to most Americans and, at the same time, bolster the solar industry. Well, that worked on both counts. First, the solar industry has grown at a tremendous rate of over 50% per year since the program started. Also, we have seen the price of solar panels drop to just 15% since congress launched the program 14 years ago.
Looking at the chart below, we can see that the average cost per watt has plummeted since 2010. Prices have gradually decreased recently as the technology improved. Right now, solar power is the least expensive available way to produce electricity. So we can see why solar has become increasingly popular. Like we say in the industry, “SOLAR SELLS ITSELF.”

LOWEST COST PER WATT IN HISTORY
This chart shows the tremendous drop in the price of electricity just in the last ten years. Efficiency in manufacturing and installation has reached an all-time high. We are witnessing the “perfect storm” of government rebates, low-cost panels, high panel generation efficiency, and experienced labor. There has never been a better time to invest in rooftop solar.

Annual Solar Photovoltaic Module Shipments Report million peak kilowatts

Source: Graph by eia.gov U.S. Energy Information Administration, Annual Solar Photovoltaic Module Shipments Report

MOST SOLAR PANELS SHIPPED
This chart shows the increase in solar panels over the years. Unfortunately, the numbers aren’t in for 2021, but the growth has continued accelerating. This growth explains why we seem to see solar panels on every street.

Graph by U.S. Energy Information Administration, Annual Solar Photovoltaic Module Shipments Report

Source: Graph by eia.gov U.S. Energy Information Administration, Annual Solar Photovoltaic Module Shipments Report

SOLAR ENERGY IS GOOD FOR HOMEOWNERS AND JOBS

Even though we had a slight decline in the solar workforce since the pandemic, solar installations reached over 19 GWdc n 2020. Another reason for the decrease in workers in recent years is that the country is increasing utility-scale solar deployment. As a result, the total labor productivity across the three solar market segments has been tremendous.

• Residential productivity increased 19%.
• Non-residential productivity increased 2%
• Utility-scale productivity increased 32%

from irecusa.org Labor Productivity Increased Allowing Increased Deployment

Source: Graph by Interstate Renewable Energy Council (IREC), 11th Annual National Solar Jobs Census 2020

If you have been considering solar panels for your home, now is the time to move forward. Prices are low, and efficiency is high.

Update: Terrific news came recently. As part of the recent spending package signed on Dec. 28, 2020, the Solar ITC federal tax credit stepdown has been delayed until 2023. That means all applicable solar systems installed in 2021 and 2022...
Read more on AltStore.com here

The post The 2021 Federal Solar Tax Credit Step Down appeared first on Solar Power News & DIY Solar Tips.

The U.S. Federal Solar Investment Tax Credit (or the Solar ITC) was slated to be reduced at the end of last year. But we all were able to breathe a sigh of relief when the federal government decided to extend the 26% credit for another two years. Well, at this writing, we are about halfway […]
November 16, 2020 | Solaris National
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