The Preservation of a Healthful Environment: Solar Roof Series – Part 3

A sunrise coming over the top of solar panels with the text 'The Preservation of a Healthful Environment' superimposed over the top

This is the third post in a series on rooftop solar technology.  This post will discuss some of the key legislative and regulatory efforts that are driving this technology and helping homeowners save energy and money on their utility bills. There are several key initiatives – both legislative and regulatory – currently in effect that will assist in the deployment of rooftop photovoltaics: the solar investment tax credit, the U.S. Department of Energy’s Sunshot program and a variety of other innovative, market-driven mortgage products offered by the Federal Housing Administration and Fannie Mae.

Solar Investment Tax Credit

The solar Investment Tax Credit (ITC) is one of the most important federal policy mechanisms to support the deployment of solar energy in the United States. The ITC was extended by Congress through 2021, which will provide business certainty to project developers and investors. The ITC continues to drive growth in the industry and job creation across the country.

  • The ITC is a 30 percent tax credit for solar systems on residential (under Section 25D) and commercial (under Section 48) properties.
  • The residential and commercial solar ITC has helped annual solar installation grow by over 1,600 percent since the ITC was implemented in 2006 – a compound annual growth rate of 76 percent.
  • The existence of the ITC through 2021 provides market certainty for companies to develop long-term investments that drive competition and technological innovation, which in turn, lowers costs for consumers.
  • The Section 25D residential ITC allows the homeowner to apply the credit to his/her personal income taxes. This credit is used when homeowners purchase solar systems outright and have them installed on their homes.

The ITC has proven to be one of the most important federal policy mechanisms to incentivize the deployment of both rooftop and utility-scale solar energy in the United States. As a result of the multi-year extension of the credit enacted in late-2015, solar prices are expected to continue to fall while installation rates and technological efficiencies will continue to climb.  The solar industry is predicting that nearly 100 Gigawatts will be installed by the end of 2020. Moreover, the roughly 210,000 Americans currently employed in solar is expected to double to 420,000 in the same time period – all this while spurring roughly $140 billion in economic activity.

Department of Energy Sunshot Program

The U.S. Department of Energy (DOE) Sunshot Initiative is a national effort to support solar energy adoption by making solar energy affordable through research and development efforts in collaboration with public and private partners. SunShot funds cooperative research, development, demonstration, and deployment projects by private companies, universities, state and local governments, nonprofit organizations, and national laboratories to drive down the cost of solar electricity. When SunShot was launched in 2011, it set a goal for solar energy to become cost-competitive with traditional forms of electricity by 2020 without subsidies. This goal set cost targets at $0.09 per kilowatt hour for residential photovoltaics (PV), $0.07 per kilowatt hour for commercial PV, and $0.06 per kilowatt hour for utility-scale PV. According to recent DOE research, the solar industry had achieved 70% of the progress toward the 2020 goals, spurring the department to determine new targets beyond 2020. As the cost of solar comes down, more Americans can take advantage of the clean, affordable power that solar provides.

Aside from these two efforts, there are other national programs and mortgage products that help consumers acquire and finance energy efficiency upgrades, including solar panels, to reduce utility costs:

  • Energy Efficient Mortgage – This is a Federal Housing Administration (FHA) loan program that allows borrowers to finance cost-effective energy-saving improvements as part of a single mortgage. These mortgages make it possible for property owners to borrow above the appraised value and stretch debt-to-income qualifying ratios.
  • PowerSaver Home Energy Upgrades – This is another FHA program available to homeowners with manageable debt and a credit score of 660 or higher. These loans do not require a home appraisal or lien on the property.
  • HomeStyle Energy Mortgage – This is a Fannie Mae program that allows borrowers to make energy-efficient or utility-cost-reducing upgrades within the mortgage when purchasing or refinancing a home.
  • Property Assessed Clean Energy Programs (PACE) – These programs allow local or state governments to fund the up-front cost of energy improvements on commercial and residential properties, such as heating and cooling systems,  solar panels or dual-pane windows. Property owners pay back those loans through a line item on the homeowners’ property tax bill.

While fossil fuels still dominate energy production overall in the U.S., solar and wind production are on a growth trajectory.  According to the U.S. Energy Information Administration, the country set a renewable energy milestone in March of 2017.  For the first time, wind and solar accounted for 10 percent of all electricity generation, with wind comprising 8 percent and solar coming in at 2 percent. The private sector is increasingly driving a global push for renewables as solar and wind become increasingly competitive. Solar panels are becoming cheaper, meaning investor interest may spur continued growth in the future.  In combination with the energy of the market, the programs and efforts described above will continue to make inroads in the consumer marketplace, making solar a viable alternative for homeowners and businesses who choose to invest in these systems.

Tune in later this week for part four of this series, where Mark Lesswing will be looking into Tesla’s innovations into the solar roofing space.