The federal solar tax credit is set to expire at the end of 2008, slowing the solar energy growth that the US market has seen recently.
On a recent trip to Greece, I was struck by the prevalence of solar hot water heaters that dotted nearly every rooftop in sight in many villages. I learned from locals that it is done mostly to save money. I dream of the United States following suit, but relatively low energy costs among other factors make such technology less profitable. The federal government does currently offer a tax credit for solar hot water and solar electric (pv) systems, but this tax credit is due to expire at the end of 2008. Currently homeowners and businesses can benefit from this credit and save up to 30% on a solar system.
The credits are “absolutely critical for making a market in the United States,” said Rhone Resch, President of the Solar Energy Industries Association. “What will happen is you will see solar installations start to drop off in the second quarter of 2008 if they are not extended.”
The solar electric market in the United States is expected to increase by over 60% according to Resch. If these incentives expire, it is likely to have a ripple effect throughout the entire solar industry, including solar investments and manufacturing.
An energy bill recently passed the Senate that had three major items stripped from it, including an extending and enhancing the solar tax credit. The $22 billion package would have boosted renewable energy, while cutting tax breaks to oil companies. The White House said it would veto the energy bill if it contained this item and the version of the energy bill that passed the Senate only has items benefiting energy efficiency.
The federal tax credit is the only solar incentive that is currently available to in many states, while some states have their own incentive programs. It is likely that the solar industry will become far more developed in states with strong incentive program, while it may decline in states that only benefit from federal incentives if they do in fact expire at the end of 2008.
Photo credit: Solar Service Inc.