The House Ways and Means Committee released details of a proposed $3.5 trillion federal budget package that includes extending the solar Investment Tax Credit (ITC) for 10 years at 30%.
A domestic content clause could boost tax credits for solar projects to 40%. A revived production tax credit (PTC) for solar as well as an ITC for energy storage projects also were included in the package’s draft language.
If passed later this year, the bill as currently drafted would extend the full ITC for 10 years before phasing it down between 2032 and 2033. (Read the bill’s clean energy provisions.)
The proposal set a 6% base credit rate which all qualifying projects may receive. For a project to receive the full 30% credit, conditions pertaining to prevailing wages and apprenticeships must be met.
In addition, all projects that start construction before a qualifying date or that have a maximum net output of less than 1 MW could claim the bonus rate and also would be exempt from the other requirements. That provision could boost both residential and commercial and industrial solar.
An additional 10% bonus credit rate also could flow to projects that use at least 55% domestically manufactured content. All totaled, the ITC then could be valued at 40%.
Lawmakers who drafted the proposal included an additional bonus credit of 10% for projects located in low-income communities. They included an annual capacity limit of 1.8 GW for each year from 2022 through 2031 for projects sited in those communities.
PTC revival
The proposed language would revive and extend a full solar production tax credit (PTC) through 2031, before phasing down to 80% in 2032 and 60% in 2033. The PTC would pay a base credit rate of $0.005 for each kilowatt-hour of energy produced. A bonus rate of $0.025/kWh would be paid to projects that meet prevailing wage and apprenticeship conditions.
The proposed bill also includes a tax credit for energy storage projects. Batteries or other storage technologies with a minimum capacity of 5 kWh could claim a base credit rate of 6%. As with the other provisions, the rate could increase to 30% if prevailing wage and apprenticeship requirements are met.
Push to passage
The proposals are part of a spending package that the Democrat-controlled Congress is aiming to pass before the end of the year. The bill is being advanced under what is known as “budget reconciliation,” a tool that would allow the bill to pass the Senate with a simple majority vote.
That is no sure thing, however. More than a few defections among House Democrats could scuttle the bill in that chamber. The margin for victory appears narrower in the Senate where all 50 Democrats need to be on board. Senators Joe Manchin (D-WV) and Krysten Sinema (D-AZ) have expressed reservations about the size of the budget bill and how it would be paid for in the coming years.
