2016 Obama budget could bolster US solar industry

The US solar sector stands to get a significant boost from the Obama administration’s 2016 budget draft, with a permanent extension of government tax credits for renewables proposed to Congress.

Currently, America’s solar Investment Tax Credit is structured as a tax credit towards 30 per cent of the fair market value of an installed solar array, but is due to be wound back to 10 per cent at end-2016, and then removed.

Barack Obama’s 2017 budget draft, released on Monday, proposes the ITC, along with the wind energy Production Tax Credit, be extended indefinitely.

And while it is unlikely America’s Republican-controlled Senate and House will approve permanent extensions of the tax credits, the proposal signals that government supports some preservation of the subsidies.Deutsche Bank analysts have described the suggested measure as “a significant positive” for the US solar sector, signalling strong support for renewables despite the current low oil price environment.

“Whether or not the ITC gets extended beyond 2016 still remains to be seen, but we believe this proposal certainly increases the chances of some sort of a positive outcome compared to the current step down of ITC to 10% beyond the 2016 timeframe,” Deutsche analyst Vishal Shah said in a note on Tuesday.

Shah says one of the possible outcomes is the grandfathering of all projects that start before the end of 2016 timeframe – as under current law, all projects have to be completed before end-2016 to get the 30 per cent ITC.

Another potential scenario, he says, is a much more gradual step-down of the ITC from 30 per cent to 10 per cent over multiple years.

The budget proposal also includes a request for $7.4 billion for clean energy technologies, along with a list of funding and incentives for the industry.

A majority of the money would be directed to the DoE, for such key initiatives as grid modernization ($356 million); $44 million to establish a 10MW scale pilot Supercritical Transformational Electric Power facility; $2.72 billion for energy efficiency; and $325 million for the Advanced Research Projects Agency, including R&D for transformational clean energy technologies.

The budget also calls for $4 billion of the funds to go towards The Clean Power State Incentive Fund, to support state efforts to cut emissions.

© 2015 Solar Choice Pty Ltd

Giles Parkinson