Key provisions in proposed legislation would provide long term stability and growth potential for the solar industry
PVTIME – Solar Alliance Energy Inc. (‘Solar Alliance’ or the ‘Company’) (TSX-V: SOLR, OTCQB: SAENF) is pleased to provide an overview of proposed legislation in the United States aimed at reducing greenhouse gas emissions by 40% below 2005 levels by 2030 through a series of initiatives that would directly benefit solar consumers.
“The proposed legislation includes several initiatives that will provide long term stability and incentives to the U.S. solar industry,” said CEO Myke Clark. “This includes an increase and extension of the investment tax credit for solar and a more flexible structure for companies like Solar Alliance to monetize that tax credit. These two key proposals have the potential to accelerate Solar Alliance’s growth, support our ability to own and operate solar projects and contribute to the strengthening of the economy through clean energy project deployment.”
Investment Tax Credit Extension
The current Investment Tax Credit (“ITC”) is a 26% tax credit for solar systems. The proposed legislation increases that tax credit to 30% for projects completed in 2022 and extends the ITC another ten years, providing a strong long-term signal to the solar industry. According to the Solar Energy Industries Association, the solar ITC has helped the U.S. solar industry grow by more than 10,000% since it was implemented in 2006, with an average annual growth of 50% over the last decade alone.
Sale of Investment Tax Credits
Currently, the business that owns a solar project claims the credit. A tax credit is a dollar-for-dollar reduction in the income taxes that a person or company would otherwise pay the federal government. But many developers don’t have sufficient tax liability to take full advantage of the tax credits themselves. In these cases, developers partner with a third-party investor using tax equity financing. Utilizing third-party tax equity can be an expensive process. Under the proposed legislation, starting in 2023 companies would be allowed to sell most energy-related tax credits to other companies without having to resort to complicated tax equity structures. For the type of projects Solar Alliance is developing this provision could reduce transaction costs and make the process of monetizing tax credits much more streamlined.
“The proposed legislation remains subject to approval by Congress and President Biden, but this development represents a significant step forward for the U.S. solar industry. The provisions contained in the proposed legislation align perfectly with our growth strategy and will help support jobs and clean energy deployment in the U.S.,” concluded Clark.
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