Regulation, Solar, Sourcing Renewables  -  July 5, 2018

IRS guidance lifts solar development

The Internal Revenue Service (IRS) issued guidance on a 2015 law establishing an investment tax credit (ITC), to clarify that solar developers who invest at least 5% of the total expected installation cost of a project by the end of 2019 will qualify for a 30% ITC.

A report by Utility Dive noted that the 2015 law did not define what qualifies as beginning new construction on a project, “to the consternation of the solar industry. The new guidance specifies that developers have four years to begin a project to qualify for the ITC, which then begins to wind down from 30% to 10% based on the construction and service dates of the project.”

Deadlines and qualifications for other types of energy properties that qualify for an incentive are specified in the guidance as well, including small wind projects, fuel cell power plants, and geothermal heat pumps.

Utility Dive noted that the guidance came as an assurance to the entire solar supply chain. "If you're making manufacturing plans, now you know what the policy's going to be going forward. The developers are now cleared up on this," said Dan Whitten, vice president of communications at the Solar Energy Industries Association (SEIA).

"With this notice, IRS sent a strong signal to investors while giving developers clear criteria on par with other renewable technologies," Liam Donovan, a principal at the law firm Bracewell LLP, told Utility Dive. Developers breaking ground or making the 5% investment in the installation by 2020 have until the end of 2023 to bring the project online in order to qualify for the highest tax incentive of 30%.

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