This story was originally Appearance is Grist, part of the climate desk collaboration.
Over the past two decades, homeowners have been able to receive thousands of dollars in federal tax credits to help offset the high upfront expenses of solar energy listings. Things should have lasted until 2034. But this week, the U.S. House of Representatives proposed a sudden end to incentives at the end of the year. If this idea survives the House and passes the Senate, it could overturn economic algorithms that power your home with sunshine
“This will make solar power impossible,” said Glen Brand, director of policy and advocacy at Solar United Neighbors. “What the House does is put the average American in a very difficult place. They basically say they are not helping people whose energy costs are rising.”
The country’s first Sun tax credit came into effect in 1978, but was allowed to expire when Ronald Regan took office in 1985. However, in 2005, another Republican – President George W. Bush – revoked them. Since then, lawmakers have extended and adjusted incentives, and recently, the Inflation Act 2022 (IRA) or IRA set credit at 30% of system costs until 2032, until 2032, and for a two-year period.
Zoë Gaston, chief analyst at residential solar, energy consultant Wood Mackenzie, said the average cost of solar systems in the U.S. is only $28,000. This means the tax credit is worth about $8,500.
On Tuesday, the House Ways and Means Committee released its initial budget settlement proposal that would withdraw most of the IRA, including support for residential solar. The so-called 25D tax credit still applies to systems installed this year, and then it will disappear completely.
Without a tax credit, solar systems may still have financial implications where they get a lot of sunlight or have high electricity prices, or both, but the payback period may grow. For others, math may not work at all.
“We expect sales and installations to surge this year, followed by a contraction in the market,” Gaston said. “If homeowners are thinking about solar and can afford it, it’s time.”
25D Credit is not the only relevant tax relief that is threatened. Another credit of 48E can be used to install solar energy in a resident’s business, then lease equipment or sign a power purchase agreement. This allows the company to reduce the fees for customers. According to Gaston, more than half of residential facilities now follow this third-party ownership model.
Rather than eliminating 48E, limits are adopted in the limitations of the source of materials in photovoltaic panels. Although experts are still addressing the meaning of the proposed language accurately, it is often intended to ban participation in “entities of foreign concern”, including Chinese people who make the vast majority of solar modules in China.
